October NY world sugar #11 (SBV26) on Thursday closed down -0.41 (-2.76%), and October London ICE white sugar #5 (SWV26) closed down -6.20 (-1.35%).
Sugar prices extended this week’s sharp losses on Thursday and fell to 2.5-week lows. An improvement in India’s monsoon rains is weighing on sugar prices. India’s Meteorological Department reported on Wednesday that India’s cumulative monsoon rainfall was 23% below normal as of July 15, a substantial improvement from 42% below normal on June 30.
An excessively long position in London ICE sugar by funds can exacerbate any price downturn. Last Friday’s weekly Commitment of Traders (COT) data showed funds boosted their long positions in ICE London white sugar by +10,368 in the week ended July 7 to a record 58,131 net-long positions (data from 2011).
Sugar prices have rallied sharply over the past three weeks, with NY sugar posting a 2-month nearest-futures high last Wednesday and London sugar posting a 10.25-month high last Tuesday. Sugar prices have climbed amid concerns that weak monsoon rains in India will lower sugar yields and reduce the country’s sugarcane harvest, the world’s second largest. India’s Earth Science Ministry warns that this year’s monsoon in India could be the weakest in 11 years. India’s monsoon season runs from June through September.
Concerns that dry weather from an El Niño event could disrupt global sugar production are also bullish for prices. The emergence of an El Niño is likely to curb rainfall in Brazil, India, and Thailand, the world’s three largest sugar-producing regions. Last Wednesday, the US Climate Prediction Center said the El Niño weather pattern that emerged across the equatorial Pacific last month will likely be one of the strongest in more than 75 years. India’s weather office recently lowered its cumulative rainfall estimate for the June-September monsoon season last Friday to 90% of the long-term average, down from a forecast of 92% issued in April.
