By Carolyn Cui

Sugar rebounded Tuesday after hitting its lowest level in 16 months a day earlier, as traders awaited news out of Brazil regarding the pace of sugar production.

Raw sugar for July added 0.4% to 12.66 cents a pound on the ICE Futures U.S. exchange. The contract settled at12.61 cents Monday, the lowest level for the front-month contract since February 2016.

An S&P Global Platts survey showed that sugar production in Brazil's key center-south region was expected to more than double in the first half of June to 2.45 million metric tons, which would also represent a 40% increase from the second half of May. Only 1.4 days were estimated to have been lost to rain during the period and current weather is ideal, suggesting that sugar mills would increase sugar production.

Brazil's Union of Sugar Cane Industry Association is scheduled to release the results Wednesday, the group said in a notice.

"Sugar production [will] set a new fortnightly record for this season due to a high sugar mix level and good crushing volumes," said Claudiu Covrig, a senior agriculture analyst at Platts Kingsman, a unit of S&P Platts.

Sugar traders are closely watching Brazil, as it is big enough to swing the global market. Despite a 30% drop in sugar prices from a year ago, many Brazilian mills would continue to produce sugar as they already locked in prices when they were higher.

With current prices now below many producers' costs, it is expected that the amount of cane devoted to ethanol production will increase, said Nick Penney, senior trader at Sucden Financial Research, in a note to clients.

Michael McDougall, director of commodities agency at Societe Generale, noted that there are still a large number of outstanding positions in the July contract, which is set to expire in four trading days.

A total of 80,557 contracts are still left outstanding as of Tuesday, 39% above the expiry of the previous May contract. The May delivery was 1.5 million tons, second only to the record delivery in May 2015, which was 1.9 million tons, according to Mr. McDougall.

"So potentially, we have a large delivery, and that, in theory should be negative," he said.

In other markets, cocoa for September gained 0.9% to $1,862 a ton, arabica coffee for July was up 0.2% to $1.2475 a pound, frozen concentrated orange juice for July lost 1.4% to $1.3780 a pound, and December cotton rose 1.1% to 67.99 cents a pound.

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

(END) Dow Jones Newswires

June 27, 2017 12:05 ET (16:05 GMT)

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