Sugar heads higher but gains capped by bets Iran war will be short lived

LONDON: Sugar prices rose on Tuesday, heading back towards Monday’s one-month-high, though bullish sentiment was tempered by bets the Iran war will not last long enough to significantly dent supplies of the sweetener.

At 1341 GMT, raw sugar price futures on ICE were up 1.4percent to 14.10 cents per lb. They closed up just 0.2percent on Monday after rallying 3percent earlier in the session to hit their highest since late January.

White sugar futures were up 1.1percent at USD418 a metric ton, after settling up 1.4percent on Monday. The Israel-US war on Iran is disrupting global energy supplies and boosting prices, prompting fears that cane mills in top sugar producer Brazil will cut sugar output and produce more ethanol, a cane-based biofuel.

Brazilian cane mills can adjust ethanol and sugar output, depending on which pays more. Sugar consultant Michael McDougall said markets are betting the Iran war will be short-lived, even though energy prices could exceed USD100 a barrel if the current rate of supply disruptions continues for a week or two.

“The short speculators are holding tough, but for how long?” he said. Speculators who hold short positions are essentially betting on price falls. They are dominant in sugar at the moment because the market is fairly well supplied and widely expected to record a surplus this season.

In other soft commodities, London cocoa was up 0.6percent at 2,130 pounds a metric ton, extending its recovery from last week’s 10percent losses. New York cocoa was down 1percent at USD2,991 a metric ton; arabica coffee edged up 0.2percent to 2.8510 per lb while robusta coffee fell 0.6percent to USD3,750 a ton.