By Carolyn Cui

Sugar futures edged lower Monday, as the Brazilian government's increases on fuel taxes failed to dispel investor fears over a larger surplus in the global market.

Raw sugar for October delivery fell 0.4% to 14.35 cents a pound, on the ICE Futures U.S. exchange.

Last week, the Brazilian government announced plans to raise taxes on gasoline and diesel fuel, in an effort to patch a budget shortfall in the country. The move was interpreted as positive for raw sugar prices, as it would drive up demand for ethanol, analysts said. Higher ethanol consumption will also lift the Brazilian sugar-ethanol parity floor, which may help support sugar prices, they said.

Sugarcane can be converted into sugar or ethanol, and when ethanol demand picks up, traders anticipate lower sugar production in Brazil, the world's largest growing region.

But sugar prices, after a short-lived rally late last week, fell again on Monday. "The problem is funds are looking ahead: next year, we'll have a surplus," said Claudiu Covrig, senior analyst agriculture at Platts Kingsman, a unit of S&P Global Platts.

Recently, several research firms have revised their estimates for next year's sugar market surplus, thanks to a larger crop in Brazil.

Brazil, as the world's largest sugar exporter, could swing the market. With an estimated production of 582 million tons of sugar cane, a 2% variation means Brazil's sugar production could range between 33.3 million and 36.3 million tons, Platts estimated.

As of last Tuesday, hedge funds and other money managers betting that sugar prices will fall outweighed the bulls by 112,050 contracts, according to the U.S. Commodity Futures Trading Commission.

In other markets, cocoa for September was down 0.2%, to $1,964 a ton; arabica coffee for September fell 1.9%, to $1.3400 a pound; frozen concentrated orange juice for September was up 2.6%, to $1.3380 a pound; and December cotton lost 0.1%, to 68.34 cents a pound.

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

(END) Dow Jones Newswires

July 24, 2017 11:50 ET (15:50 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.