Sugar Tumbles as Its Recent Upward Surge Damps Chinese Demand

(Nasdaq) – Sugar declined Tuesday from a 3.5-year high reached last week amid signs that the recent run-up in prices has already hurt demand in China, the world’s largest importer of sugar.

Raw sugar futures for July delivery fell 1.6% to 19.38 cents a pound on the ICE Futures U.S. exchange. The contract had made several attempts over the past week at the widely watched level of 20 cents, but failed to settle above that price.

Yet, the rally in sugar prices has met some resistance lately. Overnight, official data from China showed that its raw-sugar imports plunged to 140,000 metric tons in May, down 74.1% from a year ago, as Chinese sugar producers turned away from the import market as prices ran up. Instead, Chinese companies imported more refined, white sugar or simply cut back on sugar imports.

Sugar prices are vulnerable to a correction, many analysts say. Non-index funds had further extended their record net long position to 324,000 lots in sugar futures as of June 14, or 26.4% of open interest, according to data published by the U.S. Commodities Futures Trading Commission.

“However, what is standout is that in recent days we have started to see some of this spec length liquidate,” wrote analysts at Marex Spectron, who estimated that the net long has now declined to 23% of open interest.

In other markets, cocoa for September added 0.8% at $3,147 a ton, arabica coffee for September fell 1% to $1.3995 a pound, frozen concentrated orange juice futures for July fell 0.7% to $1.6570 a pound and December cotton lost 2.9% to 62.54 cents a pound.