(Bloomberg) -- Raw sugar dropped to the lowest in nearly two years on bearish sentiment as traders gauge supplies from top grower Brazil.
The most-active contract fell as much as 2.8% to 17.52 cents per pound in New York, the lowest since October 2022, as hedge funds remain bearish. Futures have dropped about 7% this month as a strong pace of sugarcane crushing in Brazil boosted the supply outlook, but commercial players have also grown increasingly concerned about the impact of dry weather.
“With temps on the rise in Brazil and no big rain showing up, I have to wonder if the funds are just following momentum and ignoring the potential dangers of the second half of the Brazil crop harvest,” said Michael McDougall, managing director at Paragon Global Markets.
Commercial players, on the other hand, are “afraid to play short” because of the tight Brazilian crop, said Claudiu Covrig, lead analyst at Covrig Analytics.
Brazil’s sugar production for the year through July is running ahead of last year’s pace, but productivity declined in the second half of the month on dry weather, according to a report late last week from industry group Unica. The market is awaiting “some sort of setback in Brazilian output,” analysts at ADM Investor Services wrote in a note Monday.
Meanwhile, soybean futures chopped in Chicago, as markets weighed ample supplies against fresh demand interest. Soybean sales this week were 813,492 tons, almost twice the 432,000 tons reported last week, the U.S. Department of Agriculture said Tuesday. Inspections for U.S. exports in the week ending Aug. 15 were also up 24% from a year earlier.
First-day estimates from the Pro Farmer Crop Tour also reinforced expectations of higher US production, although results were considered a bit spottier than expected, according to The Hightower Report. Soybean pod counts in South Dakota and Ohio are seen higher than the three-year average, according to Pro Farmer Crop Tour samples.
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