Raw sugar prices drifted to a weaker close on Tuesday as moderate selling by funds and brokers overpowered some scattered trade buying at lower levels, traders said.
The New York Board of Trade's key March raw sugar contract eased 0.09 cent to finish at 11.28 cents a lb, its lowest settlement since November 1, after dealing from 11.36 to 11.25 cents.
May futures fell 0.07 to end at 11.28 cents and deferred delivery contracts lost 0.07 to 0.10 cent. Raws were pressured as the market edged into the low-end of a recent sideways trading range and as the US dollar extended a broad rally. But long term fundamentals looked better for sugar prices, traders and analysts said.
"There's a little spec selling, a little fund selling," said one NYBOT sugar floor source. "But there is good support showing up down here at 11.25 cents (basis March) by the trade, and scale down buying also."
The dollar rallied to a two-year high vs. the euro on Tuesday, buoyed by technical buying and political factors in Europe. A stronger dollar often weighs on dollar-denominated commodities because the goods get more expensive holders of foreign currencies. Raw sugar reached a seven-year peak of 11.91 cents on October 4 on expectations that leading growers like Brazil will divert cane into the production of ethanol given high crude prices.
Analysts see a tighter stock situation in 2005/06 and the relentless appetite of funds controlling large pools of money helping keep the sugar market strong.
London white sugar ended just above earlier 15-month lows in the front month on producer and spec sales. December, which expires on November 15, fell $3 to $273 a tonne.
Final estimated NYBOT raws volume touched 24,873 lots, versus Monday's tally of 19,509 contracts. Call volume hit 3,185 lots and puts reached 4,110 lots. Open interest in the No 11 raw sugar market fell 1,672 lots to 464,582 lots as of November 7.
Demand for Brazilian sugar and ethanol will require cane output to grow to 673 million tonnes by 2013, exceeding processing capacity of 510 million tonnes expected by that time, consultants Datagro said. Brazil's current cane crop is estimated at 406 million tonnes. Plans to expand by an extra 100 million tonnes of cane production and the accompanying processing capacity has already been announced by the industry.
Chartists view support in the March contract at 11.25 cents a lb and then at 11.13 and 11 cents, with resistance at 11.60 cents, all the way up to the contract peak of 11.91. The ethanol futures market was not traded. There were no quotes in the spot November ethanol contract.
US domestic sugar prices closed mixed. The January contract rose 0.15 cent to 21.75 cents a lb and March was up 0.01 at 21.38 cents. The rest were from up 0.01 to down 0.01 cent. Volume hit 273 lots, from the prior 645 lots.
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