Raw sugar futures dropped to the lowest levels in nearly three years on Wednesday on continued speculator selling as the market faced its third straight annual surplus, traders said. Arabica coffee clawed back some of the prior day’s steep losses, while cocoa closed a choppy session relatively flat.
May raw sugar futures fell 0.34 cent, or 1.9 percent, to settle at 17.40 cents a lb, just up from the session low at 17.38 cents, the lowest for the spot contract since July 2010. Most-active July closed down 0.30 cent, or 1.7 percent, at 17.37 cents, the second position’s weakest level since July 2010. Total volume exceeded 171,000 contracts, up more than 75 percent from the 250-day average, preliminary Thomson Reuters data showed.
“The Brazilian real is weaker today, which makes the sugar exporters a lot more competitive,” said a US dealer, referring to the currency in the world’s biggest sugar grower. Speculators are holding a huge net short position, though they reduced their shorts in the week ended April 16, taking their position off the prior week’s record high. Dealers said incentives for ethanol production in Brazil may help underpin sugar prices but would not prevent a rise in sugar output there. Sugar and ethanol compete for available cane supplies in Brazil.