Futures on raw sugar rose to their highest level in over a month, as concerns over El Niño prompt traders to close short positions, UNN reports, citing Bloomberg.
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Fund managers are closing short positions because it would be "extremely irresponsible" to "sit and wait" to see if El Niño materializes as forecast, said Mike McDougall, an analyst at McDougall Global View.
Nevertheless, sell-offs could resume if the market fails to close above the three-month trend line at 15.10 cents/pound, McDougall said.
In July, India's wettest month of the monsoon season, rainfall is expected to be lower than usual, potentially impacting the country's production and reducing the likelihood of exports for the world's second-largest producer.
India's below-normal rainfall forecast for July threatens crop prospects.
The expiring raw sugar futures contract for July 2026 closed with its largest delivery for this contract since 2024.
Raw sugar reached its highest level since mid-May amid El Niño concerns.
Among other adverse factors, the most active arabica coffee contract rose 3.1%, although trading was volatile as Tuesday's intraday gain — the largest since 2021 — pushed the relative strength index into overbought territory, a technical signal that prices may have risen too quickly.
"There is a mismatch between expectations of large shipments (from Brazil) this year, which have not yet materialized, and the short-term situation in the physical market," said StoneX analyst Leonardo Rossetti.