(Bloomberg) -- Sugar futures fell by the most since May as promising production forecasts in India and Thailand snapped the sweetener’s recent rally.
The most-active contract fell as much as 3.5% in New York as output estimates in Asia, Europe and Mexico more than offset the poor outlook for Brazil, where drought and fires curbed production by the world’s top sugar producer.
Global production is expected to outpace demand by 2 million tons in the season starting October as the outlook in India and Thailand improves, StoneX said in a report. That’s up from a previous surplus estimate of 1.2 million tons.
Raw sugar futures have jumped around 17% this month on harsh weather in Brazil, and intraday prices reached the highest since February earlier this week. For technical traders, the surge pushed the commodity into overbought territory.
Sugar production in second-biggest producer India may reach 33.3 million tons in the year starting Oct. 1, the same as a July forecast, according to Gautam Goel, vice president of the Indian Sugar and Bio-energy Manufacturers Association.
“We are maintaining our earlier estimate with an upward bias due to good rain so far in the current monsoon season benefiting the crop,” Goel said. He added that the association has urged the government to allow exports. The Indian government extended export curbs on sugar last year to keep local prices in check ahead of elections and reports suggest it will likely to maintain the curbs to boost ethanol output.
Some analysts, however, are again speculating on possible exports next year, and “the export talk finally gave the market a reason to correct,” said Michael McDougall, a partner at McDougall Global View.
Meanwhile in Brazil, industry group Unica reported Center-South sugar production for the first half of September that was roughly flat compared to the same period last year.
--With assistance from Mumbi Gitau.
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