Sugar prices on Monday rebounded from an eight-session drop, buoyed by expectations that the U.S. and Mexico would soon reach an agreement on sugar exports.
Raw sugar futures for July delivery advanced 1.1% to settle at 13.96 cents a pound on the ICE Futures U.S. exchange. The July contract was down every single session since May 23, and it lost 8.7% just over last week, reaching their lowest settlement in 15 months.
"After losing so many days, it doesn't take much to spark some short-covering," said Michael McDougall, director of commodities agency at Societe Generale S.A.
Sugar traders said there was word that the U.S. and Mexico have reached a deal over a prolonged sugar trade dispute. Last month, the Mexican and U.S. governments agreed to extend the deadline for negotiations on how to structure Mexican sugar exports to the U.S. to June 5. If no deal is reached, the Commerce Department will begin antidumping and countervailing duties that could top a combined 80%, while Mexico will likely retaliate against U.S. high-fructose corn syrup and other sweetener exports.
"Potentially, if they didn't come to an agreement, that sugar would have to be dumped in the international market," Mr. McDougall said.
The beaten-down sugar market was also lifted by news that a seasonal winter frost hit some sugar-growing regions in Brazil, as well as increased imports from India as prices tumbled.
Sugar prices had fallen since early February, down 35% since this year's high that month, as the industry expected global supply to outstrip demand in the next season after a two-year deficit.
Strong production in countries such as Brazil and Thailand is expected to drive up world output by 6.6% to a record 187.7 million tons, outstripping consumption that is set to expand by 1% next year--the smallest year-on-year increase in seven years, according to S&P Global Platts, which saw a surplus of 3.138 million tons for the next season.
Brazil, as the world's largest sugar exporter, could swing the market. With 582 million tons of cane, a 2% variation means Brazil's sugar production could fall in the range between 33.3 million and 36.3 million tons, Platts estimated.
In other markets, cocoa for July fell 0.7% to settle at $1,968 a ton, arabica coffee for July was up 2.3% to end at $1.2845 a pound, frozen concentrated orange juice for July gained 2.5% to close at $1.3575 a pound, and July cotton fell 0.5% to end at 76.31 cents a pound.
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(END) Dow Jones Newswires
June 05, 2017 15:43 ET (19:43 GMT)