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Sugar Futures Drop on Prospects for Global Surplus

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10/06/2017 | 05:03pm CEST

By Carolyn Cui

Raw sugar futures slumped Friday, as traders turned their focus on the prospect of a global surplus that is going to last for years.

Sugar futures for March delivery fell 3.1% to 13.94 cents a pound on the ICE Futures U.S. exchange.

Raw sugar prices rallied earlier this week, buoyed by a sudden influx of buyers in the refined sugar market. A sharp rebound in the white premium, or the price difference between the white and raw sugar, had given hopes to some market participants that demand for the sweetener probably was not as poor as expected.

However, white-sugar futures took a nosedive on Friday, while the dollar has strengthened against many currencies of commodity producing countries. That has helped traders focus on the underlying supply and demand of commodities, including sugar.

"To be honest, there aren't many commodities that have extremely positive fundamentals," said Nicholas Gentile, managing partner at NickJen Capital Management & Consulting.

In sugar, analysts are generally expecting a surplus between 2.5 million tons to 4.5 million tons this year, and some trading houses expect the surplus to last until the year of 2020, according to Mr. Gentile.

Some analysts say there is a temporary window for sugar to rally from here.

In Brazil, analysts are now expecting the crop year to end a bit earlier because of the dry weather, which could somewhat reduce sugar supply from the largest growing country. Elsewhere in India and Thailand, sugar harvests are expected to be delayed, which might create "a short-term window of very low supply," said Bruno Lima, head of sugar and ethanol at INTL FCStone.

In other markets, orange juice for November was down 0.7% to $1.5805 a pound, cocoa for December fell 0.1% to $2,082 a ton, arabica coffee for December rose 1.3% to $1.2890 a pound and December cotton was down 0.2% to 68.12 cents a pound.

Write to Carolyn Cui at carolyn.cui@wsj.com

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