Raw sugar prices ended higher on Wednesday on trade and speculative buying, but the longer-term outlook for the market was clouded by a supply glut and the prospect that investors will sell because they feel prices will be heading lower, analysts said.
The New York Board of Trade's October raw sugar contract rose 0.15 cent to end at 11.64 cents per lb., dealing between 11.43 and 11.98 cents. It was the best close for sugar on a spot basis since it traded around 11.80 cents last week. Last on Friday, the contact settled at 11.39 cents in the worst finish for sugar since it ended at 11.20 cents on November 9.
The March contract gained 0.12 to 12.44 cents. The back contracts added 0.07 to 0.11 cent. James Corridor of Liberty Trading Group said the selling pressure abated, although an increase in open interest in the market meant investors have taken short positions on the idea that sugar prices will weaken in the days ahead.
"The market is awfully cheap," he said. Fundamentally, sugar was labouring under the prospect of a supply glut running from 2 million to more than 3 million tonnes in 2006/07, following a rally in which values peaked at a 25-year high.
Floor sources said an initial flurry of trade and possibly consumer buying propped up sugar at the start and forced speculators who were overly short to cover their positions.
"The locals all panicked and were forced to jump in ahead of the rise in the market. When it couldn't crack 12 (cents, basis October), they got out," a floor dealer said.
"It may try for another run at 12 cents, but there are a lot of shorts in this thing." Technicians saw support for the October contract at 11.50 and 11.20 cents, with resistance at 12 and 12.35 cents. Final volume stood at 73,620 lots, up from the previous count of 59,995 lots. Call volume reached 11,761 lots and puts amounted to 13,208 lots.
Open interest in the No 11 raw sugar market rose 827 lots to 505,361 lots as of September 5. There were no deals in the ethanol market. US domestic sugar prices ended mostly lower. The November contact shed 0.12 cent to 21.28 cents per lb. and January fell 0.05 to 21.25 cents. Except for two contracts, the rest lost 0.05 or 0.10-cent. Volume at the close reached 154 lots, up from the previous 56 lots.
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