Raw sugar futures rose Thursday, buoyed by signs of improving demand for refined sugar.
Sugar futures for March delivery gained 1% to settle at 14.39 cents a pound on the ICE Futures U.S. exchange.
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For weeks, poor demand for refined sugar had weighed on the raw prices. The white premium, or the price difference between the white and raw sugar, had dropped precipitously, reaching levels that weren't sufficient to cover sugar refiners' production costs.
Starting from Tuesday, the London-traded white sugar market began to see a sudden influx of buyers, driving up the front-month contract prices and the white premium. Since Monday's close, the spread between the December and March contract has turned from a negative $4.3 per ton to as high as $2.3 per ton, while the white premium has jumped from $53.50 to $62.75 per ton, according to Sucden Financial Ltd.
It was unclear what exactly triggered the buying, but traders and analysts said it might be the case that investment funds were adjusting their estimates for the European production.
"It may be the case that everyone has overestimated the pressure of the new quota-free EU crop would bring to bear on the whites market," wrote Nick Penney, senior trader at Sucden.
The rebound in white premium is likely to help demand for raw sugar, drawing producers back into the market to lock their production.
In Brazil, analysts are now expecting the crop year to end a bit earlier because of the dry weather, which could somewhat reduce sugar supply from the largest growing country. Elsewhere in India and Thailand, sugar harvests are expected to be delayed, which might create "a short-term window of very low supply," said Bruno Lima, head of sugar and ethanol at INTL FCStone.
In other markets, orange juice for November was up 0.6% to close at $1.5920 a pound, cocoa for December added 0.3% to settle at $2,084 a ton, arabica coffee for December rose 1.6% to close at $1.2720 a pound and December cotton was down 0.8% to close at 68.27 cents a pound.
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(END) Dow Jones Newswires
October 05, 2017 15:23 ET (19:23 GMT)