LONDON - Speculators and funds are likely to have extended bullish bets in ICE raw sugar futures in weekly data due on Friday, dealers say, as confidence returns to a market that could be shifting back into a supply deficit.
"Sugar has a story based on production and consumption which many other commodities do not have," said Michael Liddiard of consultancy Agrilion. ICE raw sugar futures rallied to an eight-month high of 14.43 cents a pound on Friday.
Worries over Chinese demand and a strong dollar have pushed the 19-market Thomson Reuters CoreCommodity CRB Index to near 12-year lows.
But several analysts see sugar moving into a deficit cycle after several years of surpluses, compounded by a strong El Nino weather pattern potentially hampering plantings and harvests in key growing regions, and a recent gasoline price increase in top grower Brazil that is expected to boost demand for cane-based ethanol.
Speculators boosted their net long position in raw sugar on ICE Futures U.S. to the largest level since July 2014 in the week ended Oct. 6, according to the latest data from the U.S. Commodity Futures Trading Commission on Friday.
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Several traders said they believed that the next U.S. Commitments of Trade data on Friday, could show a larger net long position held by so-called non-commercials - speculators and funds - after the latest rally.
One European broker estimated that the non-commercials had boosted their net long position in raw sugar to some 100,000 to 130,000 lots, from 75,619 contracts in the week ended Oct. 6.
Romain Lathiere, a fund manager with Diapason Commodities Management, said he believed the sugar market had shown signs of a turnaround, driven by a recovery of Brazil's currency from near 12-year lows, recent short covering, and sentiment that the market is moving back into deficit.
"For me there is no sign of real weakness in the leg up that we saw," Lausanne-based Lathiere said.
