Raw sugar climbed for a second day on optimism that recent declines would draw in buyers and stronger crude prices may prompt mills to divert more cane to make ethanol.
The most-active contract rose as much as 0.9% to 16.82 cents per pound, the highest level since June 4. Higher fuel costs can increase demand for ethanol, which is also made from sugar cane in countries like Brazil and India.
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Prices had slid in recent weeks, closing at a four-year low on Friday on forecasts for bumper supplies from key growers.
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“Buyers who were sitting on the sidelines are expected to come to the market after the recent fall in prices,” said Rahil Shaikh, managing director at trading firm Meir Commodities India Pvt. “Stronger crude is also supporting ethanol parity for mills.”
The market was under pressure in the last few weeks on reports that the early arrival of monsoon rains in India would boost the cane crop, Mark Bowman, a senior analyst at ADM Investor Services wrote in a note on Monday. Global production prospects were also buoyed by forecasts of good rains in Thailand, he said.
The market will focus on the UNICA report this week to see if the seasonal reduction in rainfall during the second half of May helped Brazil's Center-South harvest, Bowman said.
Sugar cane harvesting in the South American nation had a slow start due to heavier-than-normal rains in late April and early May, according to Bowman. The biggest sugar producer also experienced a record drought last year.
Prices
Raw sugar was up 0.6% at 16.77 cents a pound as of 07:57 a.m. in New York
White sugar rose 0.3% in London
Arabica coffee climbed in New York and cocoa declined
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