Sugar jumped as any supply disruption may fuel rally

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Source: Dukascopy Bank SA
Rural commodities soared on Monday amid global supply concerns. Unfavorable weather in South America coupled with signs of strengthening demand for US wheat sent grains higher. Meanwhile, softs gained on coffee leaf rust concerns and a potential rally of sugar prices in case of any supply disruption.

Wheat continued to draw strength from a recent USDA report showing larger-than-expected increase in US wheat exports last week. However, rainfalls in the key US producing regions weighed on supply risk premium of the grain.

Corn moved higher as unfavorable weather conditions in South America are likely to boost demand for US supplies. Drought in Argentina may cut corn crops in the country, while heavy rains in Brazil are slowing harvesting.

Sugar climbed on speculation that even a small supply disruption may put strong upward pressure on the sweetener as speculators are increasing bets for lower prices. In the week ended January 22, speculators except for index funds increased their net-short positions by 49%.

Coffee prolonged its rally on concerns over spreading coffee leaf rust in Central America.
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