Raw sugar futures surged to a one-month high as investors unwound bearish bets, driven by expectations that Brazil mills will prioritize ethanol production over sugar. The most-active contract climbed 1.7% on Monday to above 15 cents a pound, marking a second consecutive day of gains. Market participants anticipate reduced sugar supply from the top global producer as mills shift focus to biofuel amid increased demand from the Middle East conflict.

The technical picture turned bullish with sugar prices crossing above the 200-day moving average. Money managers have already reduced short positions according to weekly CFTC data. Bruno Lima, director for soft commodities at StoneX, noted uncertainty regarding the market's capacity to absorb large ethanol production despite declining Brazilian ethanol prices that are limiting the shift away from sugar.

Cocoa futures also strengthened in New York, reaching levels not seen since February as prices recover from this year's steep losses. Archer Consulting's Arnaldo Correa indicated sugar could climb beyond 17 cents per pound if the current trend continues, though the magnitude of the ethanol production shift remains a critical variable amid fertilizer access concerns and potential El Niño weather impacts in West Africa.