By Julie Wernau
Sugar futures rose sharply higher Tuesday as funds added to long positions in the market during a gap in the sugar season when production is scarce.
Raw sugar for March delivery jumped 5.1% to end at 20.51 cents a pound on the ICE Futures U.S. exchange, its largest percentage gain since Sept. 16 and its fifth straight rise.
The sugar market has been on a tear since last week when Unica, the industry group for the sugar industry in Brazil, the world's largest growing region, released data indicating that mills there have largely stopped for the crushing season. In the previous year, some mills continued to crush cane into March.
"Going into an intercrop season, stocks are coming down all over the world, especially in Brazil," said Claudiu Covrig, senior agriculture analyst at Kingsman, a unit of S&P Global Platts. "Against March, you have every reason to be bullish."
Also in Brazil, a boost to oil prices and a recent drop in sugar prices has lowered the arbitrage between sugar and ethanol prices, which could lower the amount of cane that mills decide to convert to sugar over ethanol, traders said.
Traders are also looking to India, the world's second largest producer of the sweetener, with a disappointing sugar crop there leading some traders to speculate that the country could remove or lower its import duties for sugar to help supply the domestic market.
Sucden Financial Research said in a note that sugar production in India could drop to below 20 million tons from earlier estimates of 23 million tons and that dry weather in the main cane area of Maharashtra is causing many mills to close operations early.
"Should the pace of production decline further, it may put further pressure on the Indian government to reduce the 40% import duty," the firm said.
In other markets, cocoa for March was up 1.9% to settle at $2,166 a ton, arabica coffee for March rose 0.3% to $1.374 a pound, frozen concentrated orange juice for March was up 0.3% to end at $1.9455 a pound and March cotton rose 1.6% to settle at 71.78 cents a pound.
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(END) Dow Jones Newswires
January 03, 2017 15:34 ET (20:34 GMT)
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