Sugar prices retreated Monday as traders turned their focus on an increasingly growing glut of the sweetener.
Raw sugar for October delivery dropped 1.7% to settle at 14.31 cents a pound on the ICE Futures U.S. exchange.
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Poor demand for refined sugar weighed down on the raw prices. The white premium, or the price difference between the white and raw sugar, has dropped in recent months, reaching levels that aren't sufficient to cover sugar refiners' production costs.
Last Friday, the October white sugar futures expired in London with a 1.3% decline in prices and the smallest physical delivery for the contract since 2009, suggesting poor demand for refined sugar.
"If you have such a low white premium, imagine who is going to take your raws," said Claudiu Covrig, an analyst at Platts Kingsman, an agricultural analysis unit of S&P Global Platts.
The government of Pakistan, a sugar producer, last week approved a subsidy of around $101 a ton to support a total 500,000 tons of sugar exports.
China, one of the world's largest sugar importers, announced Friday that it would release 200,000 metric tons of white sugar from its national stocks as early as Monday, followed by a second tranche of 167,000 tons that is expected to hit the market late this month.
A sharp decline in China's sugar production in recent years led the government to impose heavy tariffs on sugar imports to protect the country's less-efficient and uncompetitive sugar industry. As a result, China's sugar imports fell this year, as sugar users turned to the country's huge stockpiles for supplies.
Thanks to bumper crops around the world, the sugar market is forecast to experience a significant supply surplus this year.
Societe Generale recently raised its estimate of world sugar production to 179.5 million tons for the marketing year 2017/2018, a 5.5% increase from the prior year. As a result, the bank now foresees a global surplus of 5.3 million tons, up from its earlier estimate of 4.5 million tons, due to largely favorable weather in India. Brazil, meanwhile, is expected to produce a record amount of sugar in 2017/2018.
In other markets, orange juice for November was up 1.1% to close at $1.5135 a pound; cocoa for December fell 1.7% to settle at $1,975 a ton; arabica coffee for December fell 0.7% to close at $1.4035 a pound; and December cotton was up 0.6% to end at 69.50 cents a pound.
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(END) Dow Jones Newswires
September 18, 2017 15:41 ET (19:41 GMT)