By Carolyn Cui

Sugar futures slumped Monday, as traders were disappointed at the lack of fresh bullish news ahead of the expiration of the nearby contract.

Raw sugar for March delivery dropped 2.9% at 19.23 cents a pound on the ICE Futures U.S. exchange, the lowest level since the beginning of this year. There are only two trading days left for the contract.

So far this year, sugar prices have moved in a narrow range between 20 cents and 21.5 cents a pound, as market participants weighed opposing bullish and bearish forces.

While the industry largely expects the global sugar market to return to a modest surplus in 2017/2018, many traders are betting on rising demand for imports from India and China.

The sugar market is facing a number of uncertainties. Chief among them is whether India would lower its import duty to allow more imports of the commodity. China is also seen to be taking in more white sugar through Myanmar, the gateway for sugar smuggling into China. On the production side, farmers in Brazil, the world's largest sugar exporter, will soon start to plant the next crop.

Analysts at London-based broker Marex Spectron attributed the "lethargy" to the delayed Indian government action to lower its import duty and allow more imports of sugar. "The bull story is simply stable," they said in a note to clients.

In recent days, traders were also closely watching the March contract, which will roll off the board on Tuesday. Based on the number of outstanding contracts and the price structure, traders said its expiration would occur without much firework.

"Maybe the market is suffering from disappointment that the March NY is approaching expiry...'not with a bang, but a whimper'," wrote analysts with Marex Spectron. Based on Friday's open interest, the market was still expecting a delivery of between 500,000 tons and up to 1 million tons, according to Agrilion Commodity Advisers.

In addition, Marex Spectron said in the note that high sugar prices over a long period may have caused incremental increases to production and decreases to consumption, as anecdotal evidences in India and Brazil showed.

Still, traders were piling into the sugar market along with other commodities. Last week, the non-index funds added a net long position of 9,000 lots to 195,000 contracts, according to data from the Commodity Futures Trading Commission.

In other markets, cocoa for May delivery edged down by 0.6% to $1,982 a ton; arabica coffee for May fell 2.5% to $1.4260 a pound; frozen concentrated orange juice for March lost 4.7% to $1.5735 a pound; and May cotton added 0.1% to 76.63 cents a pound.

Write to Carolyn Cui at carolyn.cui@wsj.com

(END) Dow Jones Newswires

February 27, 2017 12:09 ET (17:09 GMT)

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