Raw sugar futures crumbled from a late barrage of speculative sales and switch trade to end softer on Friday, but the market's outlook remains bullish and most analysts feel higher prices are likely in the days ahead.
The New York Board of Trade's May raw sugar contract fell 0.37 cent to settle at 17.90 cents a lb, dealing from 17.70 to 18.40 cents.
On Thursday, the contract finished at 18.27 cents in the highest close for sugar on a spot basis since ending at 18.80 cents on February `8.
July shed 0.32 cent to 17.89 cents. Distant months retreated from 0.16 to 0.24 cent. "It just went back and forth all day long until it got dumped by the specs late.
We're also starting to see more switches in May since it goes off (the board) next month," a long-time floor dealer said. "You also probably saw some end-of-the-month liquidation in there too." The May contract will expire April 28. Open interest in the contract fell 2,852 lots to 205,910 lots as of March 30.
Fundamentally, most in the trade feel supplies will remain tight since top grower Brazil will likely devote a larger chunk of the cane during the harvest of its main center-south sugar crop to manufacture the alternative fuel ethanol.
That would reduce the amount of cane going into sugar production and could squeeze supplies at a time when reform of the European Union's sugar regime meant sugar from that area will be scarce as well.
Futures worked its way higher at the start on follow-through buying by commodity funds, but the market could not extend its way up and came under pressure from speculators cashing in their gains before the weekend.
"We tailed off but we are still close to 18 (cents, basis May) since some guys covered late. The switches will take over this market soon and then we see how demand and supplies shape up afterward," one said.
Technical analysts feel resistance in the May contract is at 18.40/50 and 19 cents. Support was at 17.65/70 cents.
Volume before the end of trade reached around 40,753 lots, against the previous count of 70,088 contracts.
Call volume touched 15,429 lots, while puts hit 6,897 lots. Open interest in the No 11 raw sugar market rose 3,557 lots to 480,532 lots as of March 30. The ethanol market was untraded. US domestic sugar prices ended steady to higher. The May contract was flat at 24 cents a lb and July edged up 0.01 to 23.91 cents. The rest gained 0.02 to 0.17 cent. Volume before the close stood at 484 lots, from the prior count of 866 lots.
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