Sugar fell to a six-year low on speculation that the global glut will increase as the harvest accelerates in Brazil, the world’s top producer.
On ICE Futures U.S. in New York, raw sugar for October delivery tumbled 4.9 percent settle at 11.44 cents a pound at 1 p.m. Earlier, the price touched 11.35 cents, the lowest for a most-active contract since Jan. 14, 2009.
The drop was the biggest among 22 raw materials in the Bloomberg Commodity Index. That gauge fell to a 13-year low, partly as the dollar’s rally eroded the appeal of energy, agricultural products and metals as alternative investments. Global sugar supplies have outpaced demand for five straight years, and beneficial weather in parts of Brazil probably will aid the harvest stalled by rain earlier this month.
“Sugar is under the same weight as many commodities today,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. In Brazil, “with expected clearer skies in the coming week or two, we’ll probably get the cane harvest to catch up from the slowdown,” he said.
Sugar has dropped 21 percent in 2015, while dollar has climbed 7 percent against a basket of 10 currencies. The commodity fell in the previous four years, a record slump. On Monday, the greenback rose to a 14-week high.
“Good drying conditions” for the sugar crop are expected in Sao Paulo and neighboring areas later this week and through next week, Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas, said Monday in a telephone interview.
The drop in energy prices added to bearish sentiment in sugar because Brazilian ethanol producers have less incentive to use cane to make fuel, Cordier said. On Monday, crude-oil futures in New York fell to a three-month low.
“With a lower energy price, more sugar is being refined for food,” Cordier said. “End-users who would normally build inventories at low prices continue to buy hand to mouth.”
In the week ended July 14, hedge funds held a net-long position of 2,764 futures and options in sugar, government data showed on July 17. That was only the second bullish bet since August.
In the week ended March 24, net shorts were a record 116,984 contracts.
“As the market came off during last week and is coming off today, speculators are reopening short positions,” Bruno Zaneti, a risk management consultant at FCStone do Brasil in Campinas, said in a telephone interview.