Sugar futures tumbled Tuesday, as traders took profits made over the past few sessions, with the recent rain expected to stop in Brazil.
Raw sugar for July delivery dropped 3.9% to settle at 15.87 cents a pound on the ICE Futures U.S. exchange.
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Despite the political turmoil in Brazil, prices of sugar gained in recent days as heavier rainfalls hampered production and shipment of the sweetener in the world's largest sugar-exporting country. In addition, a stronger dollar versus the Brazilian real also helped boost the prices of sugar, which was up as much as 8% since May 5.
"Today is more like a correction, more than anything else," said Bruno Lima, head of sugar and ethanol at INTL FCStone in Brazil. He added that prices failed to break some technical levels a day earlier, triggering some selling by computer-programmed traders.
Some producers who were waiting on the sidelines also took advantage of the recent rally to sell into the market, according to James Liddiard, an analyst with Agrilion Commodity Advisers.
Sugar prices had been retreating since early February, losing nearly 30% as of early May, 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.
The latest rally was largely driven by the wet weather in Brazil. "We received a lot of rains in the past few days," disrupting crushing at many mills in the country's key center-south region, Mr. Lima said.
However, the latest forecast showed that rain is expected to stop, and most of the mills will resume production in the next day or so, he said. INTL FCStone expects to see no rain at least until next Tuesday.
In other markets, cocoa for July fell 0.7% to settle at $2,021 a ton, arabica coffee for July was down 0.3% to close at $1.3025 a pound, frozen concentrated orange juice for July fell 0.2% to $1.3580 a pound, and July cotton fell 1.5% to end at 77.22 cents a pound.
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(END) Dow Jones Newswires
May 23, 2017 15:47 ET (19:47 GMT)