(NASDAQ) – Raw sugar futures jumped as bullish traders learned that a large percentage of sugar mills in Brazil are struggling to pay the bills but failed to end above a closely watched level.
Raw sugar for October rose 1.5% to end at 19.89 cents a pound on the ICE Futures U.S. exchange, shedding earlier gains that pushed the contract as high as 20.11 cents a pound in earlier trading.
“We’ll probably find that the agricultural yield will fall for the producers that are in bad financial shape,” said Robin Shaw, analyst at Marex Spectron in London.
Some mills that are low on cash or credit following a long-lasting downturn in both sugar and oil prices have not been re-planting cane at the same rate, he said, and aren’t applying the same amount of herbicides and fertilizers.
Still, Mr. Shaw said he believes sugar’s rally is overdone. Sugar futures are up 32% year-to-date, the second-best performing major commodity this year behind silver. As of last Tuesday, hedge funds and other money managers in the sugar market betting on higher prices outweighed bearish bets by 244,774 contracts, according to U.S. Commodity Futures Trading Commission data released Friday.
Last week the sugar market failed to make any significant moves higher as it digested news that sugar production in Brazil had improved in the second half of June, up 10.4% at 2.8 million tons. The market closed nearly unchanged on the week.
Analysts said the contract’s failure above the 20 cent level likely means the bulls are meeting with some resistance that will prevent the contract from a making another leg higher in the short term. Trading volumes were light Monday at 76,357 contracts. In the month of June 110,937 contracts changed hands on the lightest trading day. So far in July, volumes have been lower than on all but one trading day.
In other markets, cocoa for September delivery dropped 1.1% to end at $2,854 a ton, arabica coffee for September fell 0.6% to close at $1.411 a pound, frozen concentrated orange juice for September rose 3.7% to end at $1.8735 a pound and December cotton dropped 0.5% to settle at 72.29 cents a pound.
