Large and small speculators, excluding index funds, boosted bets on falling sugar prices by 28 per cent this year, data from the US commodity futures trading commission showed.
Net-short positions were 75,108 contracts as of Tuesday, the commission said in its commitment of traders report published last week.
That is down from a record net-short of 90,249 contracts a week earlier and up from 58,621 lots at the end of last year.
Raw sugar fell 16 per cent last year and 27 per cent in 2011, the biggest two-year loss since 1999. The commodity, which was the third-worst performer in the Standard & Poor's GSCI gauge of 24 raw materials last year, is down 3.2 per cent this year. A third year of declines would be the longest slump since 1992.
While producers held back from selling because of lower prices, consuming countries including Egypt, Iran, Russia and China took advantage to make earlier purchases, according to Desmond Monteith, a director of the sugar department at Armajaro Trading, a London-based supplier of sugar, cocoa and coffee.
He was speaking ahead of the Kingsman sugar conference, now being held in Dubai, which has gathered more than 600 sugar trade leaders from around the world.
Sugar could still have a "short-term" rally should investors decide to close out bets on lower prices, giving producers an opportunity to sell at a better price, Mr Monteith said.
"There is a school out there that believes that if the market was to start rallying through the 19 cents to 19.50 cents a pound resistance area, you could trigger quite a sizeable speculative short-covering move and that might even mean that the speculators go long," Mr Monteith said.
"From the trade point of view, this would be seen as an opportunity to sell the market at a better level. The question is from what level and how far can the speculators lift the market when there's undoubtedly going to be quite sizeable pricing from producers, in particular out of Thailand and Brazil," he said, referring to hedging.
ICE benchmark raw sugar futures prices are likely to move in a range between 14 and 20 cents per pound for the coming year, Mike Gorrell, the head of the Imperial Sugar Company, a unit of Louis Dreyfus Commodities, said yesterday.
ICE front-month raw sugar settled up 0.11 cent at 18.89 cents a pound on Friday.
That was well above the more-than-two-year low of 18.06 cents a pound touched on January 23.
Mr Gorrell gave the forecast in a keynote speech at the Dubai conference.