(Nasdaq) – Sugar prices rose in early trading before reversing sharply as traders took profits following a steep rise that recently moved prices to near eight-month highs. The most active contract hit seven-year lows in August and has since climbed 34% as the world enters its first year in six in which sugar demand is expected to outstrip production.
Raw sugar for March delivery fell 1.1% to 13.93 cents a pound on the ICE Futures U.S. exchange after rising as high as 14.38 cents a pound.
James Liddiard, senior vice president at Agrilion Commodity Advisers in New York, said in a note that commerical traders, end users and producers feel the market is overdone at a time when speculative buyers have turned more bullish.
Brazil’s state-controlled oil company Petroleo Brasileiro SA, or Petrobras, recently announced an increase in the price of gasoline, and the federal government raised a tax on the fossil fuel earlier this year. That has some traders expecting further decreases to sugar production because of expectations that more sugar cane will be converted to ethanol in Brazil, the largest sugar producer.
The International Sugar Organization expects world demand for the sweetener to outstrip production by 2.5 million metric tons in the year that began Oct. 1.
“Overall the market has come a long way up in a very short time and is due a correction,” Price Futures Group in Chicago said in a note.
In other markets, cocoa for December delivery slumped 0.8% to $3,084 a ton ahead of demand data expected out of North America at 4 p.m. ET today. Traders are expecting tonnage of cocoa beans processed into semi-finished product in North America to drop compared with last year.
Arabica coffee for December fell 0.6% to $1.339 a pound, cotton for December fell 0.6% to 63.41 cents a pound and frozen concentrated orange juice futures for November rose 2% to $1.302 a pound.
