Sugar futures rose to their highest level in recent months, as investors scaled back bearish bets on expectations that mills in top producerBrazil will focus on producing ethanol from sugarcane rather than the sweetener.
In New York, the price of raw sugar rose as much as 1.7% on Monday, surpassing 15 cents per pound, marking its second consecutive session of gains. Although the war in the Middle East is believed to be increasing demand for biofuel, falling ethanol prices in Brazil are discouraging producers from diverting even more sugarcane to the production of that product.
“There is still uncertainty regarding the market’s ability to absorb the large volume of ethanol production,” said Bruno Lima, director of soft commodities atStoneX, referring to the amount of sugarcane that mills have available for the sweetener or ethanol.
Sugar futures are trading above the 200-day moving average, a key technical signal for a price rally. Fund managers have already reduced some of their short positions, according to weekly CFTC data. However, prices could exceed 17 cents per pound if the trend continues, Arnaldo Correa of Archer Consulting noted in a client report.
Cocoa futures also rose in New York, reaching their highest level since February. Prices are rebounding after significant losses, amid concerns over a lack of access to fertilizers and the potential impact of the El Niño weather phenomenon in West Africa.