Sugar prices surged Monday to their highest level in eight months, extending a two-month rally as coming rains in Brazil, the world's largest producer, posed the potential to disrupt harvest season and crimp supplies.
Sugar futures rose 2.5% Monday to close at 14.64 cents a pound on the ICE Futures U.S. exchange, their highest settlement since Feb. 19. The market has rallied more than 40% since late August amid expectations of a possible supply deficit, in part because of weather disruptions from El Nino storm conditions this fall and winter. Financial speculators such as hedge funds have turned strongly bullish on the market, with bets on rising prices outnumbering so- called short trades by more than 3-to-1.
More recently, the momentum has come from expectations that rains could disrupt harvest and limit supply. Brazil is in the midst of its harvest season, and showers and thunderstorms are expected in growing regions Monday and Tuesday, and then returning Friday, according to forecaster Meteorlogix.