Speculators Cut Short Positions in Raw Sugar, Boost Longs in Coffee Markets

The latest CFTC Commitment of Traders (CoT) report for raw sugar and coffee markets as of May 10, 2025, reveals a stark divergence between speculative and commercial traders. While large speculators continue to reduce their bearish bets on both commodities, commercial traders—often hedgers with direct exposure to supply chains—are amassing long positions, signaling a bullish outlook. This disconnect hints at underlying tensions between short-term market sentiment and fundamental expectations of supply constraints or rising demand.

Coffee: Speculators Trim Shorts Amid Commercial Optimism

In the coffee market, managed money accounts trimmed their net short position to -48,090 contracts, a 5,483-contract reduction from the prior week, reflecting a slight shift toward less bearish positioning. Meanwhile, commercial traders bolstered their net long positions to 45,645 contracts, up 2,125 contracts, suggesting confidence in higher prices ahead.

The total open interest for coffee rose to 174,735 contracts, a 3,300-contract increase, indicating heightened market participation. A 3% decline in the 10-day moving average of net speculative positions underscores persistent bearishness among non-commercial traders, even as hedgers accumulate longs.

Raw Sugar: Shorts Expand, but Commercial Bulls Dominate

The raw sugar market tells a more dramatic story. Managed money accounts deepened their net short position to -126,800 contracts, a 10,200-contract decline from the previous week, marking a renewed bearish stance. However, commercial traders countered this by increasing their net longs to 123,500 contracts, a 8,100-contract jump. The gap between commercial longs and speculative shorts widened to 23,300 contracts, the largest spread in months.

Total open interest in sugar reached 250,300 contracts, up 1,500 contracts, signaling sustained interest. A 4% drop in the 10-day moving average of speculative net positions highlights entrenched bearishness, even as hedgers—often positioned closest to production and supply—bet on higher prices.

Why the Disconnect?

The divergence likely stems from contrasting views on supply and demand fundamentals. Commercial traders, who often hedge against price risks tied to crop yields or geopolitical events, may be anticipating tighter supplies. For instance, Brazil’s sugarcane harvest—a key global supplier—could face delays due to weather, while coffee-producing regions like Brazil and Vietnam might see reduced output due to climate shifts.

Meanwhile, speculators may be reacting to near-term oversupply or dollar strength, which historically pressures commodity prices. The U.S. dollar index’s recent rise—driven by Fed policy expectations—could be weighing on both markets.

Conclusion: Hedgers’ Edge in a Volatile Landscape

The CoT data paints a clear picture: commercial traders are positioning for a bullish turn in both commodities, while speculators remain pessimistic. Historically, hedgers’ insights into physical markets often prove prescient. For instance, in 2023, sugar prices surged by 22% after hedgers anticipated production shortfalls.

With sugar’s commercial-long-to-spec-short spread at 23,300 contracts—a level not seen since 2021—and coffee’s hedger longs nearing parity with spec shorts, investors should monitor these trends closely. Should supply constraints materialize—whether due to weather, logistics, or geopolitical factors—the market could pivot sharply upward, rewarding bulls.

For now, the data suggests investors might consider incremental long positions in both commodities, particularly sugar, while keeping an eye on hedger activity and open interest trends. The stakes are high: a 1% shift in global sugar supplies can move prices by over 10%, and coffee’s sensitivity to weather patterns leaves it prone to abrupt volatility.

In this tug-of-war between sentiment and fundamentals, hedgers’ bets may ultimately prevail.