Sugar dropped Monday, as traders once again turned their focus to underlying market fundamentals amid a calming Brazilian real.
Raw sugar for October fell 1.1% to 14.15 cents a pound on the ICE Futures U.S. exchange.
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Sugar futures rallied in the last three sessions last week, as the Brazilian currency sharply strengthened against the dollar. A stronger real discourages local mills to send sugar overseas as domestic prices are relatively stronger. On Monday, the real is currently slightly weaker, down 0.1%, against the dollar.
However, sugar's strong price actions defied a slew of bearish news last week. Brazil's state-run oil company Petrobras last week reduced gasoline prices at the refinery by a total of 2.9%, which will in turn encourage sugar mills to produce more of the sweetener than ethanol.
At the same time, Brazil's cane industry associated reported that mills in the country favored sugar over ethanol to a larger extent than had been forecast when weather conditions were dry. "Since there is little rain expected until the end of this month, so this trend should continue in the short term," wrote Nick Penney, senior trader at Sucden Financial Research.
In India, sugar mills are expected to produce 25.1 million tons of sugar during the 2017-2018 season beginning October, nearly 25% higher than last season's 20.3 million tons, according to the Indian Sugar Mills Association.
"The intense appreciation of the real against the dollar since last Wednesday... overshadowed this whirlwind of bearish news," wrote Lucas Oliveira, a consultant of sugar and ethanol at INTL FCStone in Brazil.
Managed money continued to dash out of the sugar market, selling 4.515 contracts in the week ended July 11 and reaching a record net short position for the group of 117,748 lots.
In other markets, cocoa for September lost 0.9% to $1,896 a ton; arabica coffee for September gained 0.2% to $1.3390 a pound; frozen concentrated orange juice for September was unchanged at $1.3385 a pound; and December cotton added 1.7% to 67.70 cents a pound.
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(END) Dow Jones Newswires
July 17, 2017 11:25 ET (15:25 GMT)