Sugar prices fell Monday after fresh projections of a supply surplus.
Raw sugar for March delivery fell 2.5% to 14.98 cents a pound on the ICE Futures U.S. exchange. Prices had been beaten down earlier this year before rising to their highest level since May last week, boosted by weather concerns and higher energy prices. Many sugar producers convert cane to ethanol.
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However, the International Sugar Organization recently raised its market surplus in 2017-18 by nearly 9% to 5.03 million tons, according to analysts at Commerzbank. The ISO expects a 3-million-ton surplus in 2018-19, the analysts said. Those forecasts came after the U.S. Department of Agriculture also increased its own supply projections.
The bearish forecasts combined Monday with falling energy prices and the rising dollar weighed on sugar prices, said Jack Scoville, vice president of Price Futures Group in Chicago. A stronger U.S. currency makes dollar-denominated commodities more expensive for overseas investors. The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, advanced 0.3% Monday.
"Overall, sugar has got limited upside potential," Mr. Scoville said. "This might be it," he said, referring to the recent rally.
Some analysts also attributed part of sugar's recent rally to investors covering their short positions rather than improving long-term fundamentals. The latest data from the Commodity Futures Trading Commission released Friday showed bearish bets by hedge funds and other speculative investors dropped during the week ended Nov. 14.
In other soft commodity markets, March cocoa fell 2% to $2,089 a ton, March arabica coffee closed down 1.2% at $1.2575 a pound, January frozen concentrated orange juice inched up 0.3% to $1.6730 a pound and March cotton advanced 2.2% to 70.85 cents a pound.
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(END) Dow Jones Newswires
November 20, 2017 15:10 ET (20:10 GMT)