Improved sentiment towards raw sugar futures, evident in a recovery in speculators' net long position in the sweetener, may prove short-lived, given the availability of supplies, banks said.

Managed money, a proxy for speculators, in the week to last Tuesday hiked their net long position in New York raw sugar futures and options by more than 15,000 contracts, regulatory data showed.

The influx took the net long position – the advantage of long bets which benefit when prices rise over short positions which profit when values fall – to nearly 50,000 contracts, and came as worsened Brazilian cane harvest weather, and India's return to imports, revived concerns over supplies.

New York's benchmark March contract hit 21.72 cents a pound last Tuesday, their highest in nearly two months, and up 11% from a September low.

'Much lower prices'

"Short-covering remains the dominant feature of the sugar market," Luke Mathews at Commonwealth Bank of Australia said.

Barclays Capital, flagging an Indian government forecast that domestic sugar output is unlikely to fall below 23m tonnes in 2012-13, said that "the global surplus will cap upside" in prices.

And in Singapore, Phillip Futures flagged the potential drop in prices to levels not seen since May 2010, if a key technical price support level fails.

"Current prices do not seem to accurately represent a large global excess" in supplies, the broker said.

"Given current levels of demand-supply, price would trade at a much lower range, possibly even touching the 2010 low of 13.67 cents a pound, if it breaks below the current resistance of 18.87 cents a pound."

Cotton shorts

The regulatory data, from the Commodity Futures Trading Commission, revealed that even as speculators increased their affections towards raw sugar they turned markedly more downbeat over prices of New York cotton futures and options, shifting indeed to a net short position for the first time since July.

The cut of 13,300 lots in terms of net long exposure represented the biggest switch since February, and came amid growing concerns over the impact of China's huge inventories, which the International Cotton Advisory Committee warned could depress further global values of the fibre.

Extra pressure on prices is coming from the US harvest, which as of a week ago was 14% complete, in line with the long-term average, although some potential rain damage has helped stabilise futures, which edged 0.4% higher to 71.77 cents a pound in New York on Monday, for the December lot.

"Rainfall from west Texas to the US Delta last week is likely to have resulted in cotton fibre quality issues," Mr Mathews said.

Soybean sell-off

In Chicago, the recovery in estimates for the US soybean crop prompted speculators to cut their exposure to rising prices of the oilseed to the lowest in six months, the regulatory data showed.

The switch came amid pressure on prices blamed on the US harvest raising supplies and on higher hopes for the US soybean crop, which were crystallised last week in forecasts from commentators such as Allendale, FCStone and Informa Economics.

Chicago's November soybean contract on October 3 dropped to $15.04 a bushel, down nearly $3 a bushel from a record high, for a benchmark lot, set a month before.

Negative on products too

The sell-off in the oilseeds complex was reflected in a slump of 18,677 lots in managed money's net long position in Chicago soyoil.

The net long holding in soymeal dropped for a fourth successive week, to its lowest since February.