New York sugar up

Raw sugar futures settled higher Friday on spread and investment fund buying inspired by a rally in crude and other commodity markets, brokers said. But analysts said the rally was muted and this did not augur well for sugar's ability to sustain its surge.
"Sugar's rallying along with the board," said James Cordier, founder of optionsellers.com and analyst for Liberty Trading Group. "(But) it's never up on its own." The key July raw sugar contract rose 0.18 cent to end at 9.74 cents per lb, dealing from 9.63 to 10.15 cents. October added 0.14 cent to 11.05 cents.
Volume traded in the July contract was 82,256 lots at 2:54 pm EDT (1854 GMT). The market jumped after crude, metals and commodity indexes surged, riding a wave of spillover fund buying to race past the 10 cents area, basis the spot month, dealers said. But sugar again disappointed many commodity analysts when it failed to stay above 10 cents and extend its rally, they said. "You have to feel that if sugar cannot even stay here without such a massive rally in the others (markets), it's probably headed lower next week," one said.
Fundamentally, the outlook for sugar is for higher prices over the long term given a steady rise in consumer buying, lower Indian production, the increased use of the cane-based alternate fuel ethanol and an expected deficit in the 2008/09 season.
The short-term technical signals, though, are for sugar to slip, the traders said. There is also the process of switching as investors get out of sugar ahead of the July contract's expiration at the end of the month. "We probably take a stab at an area below 9.50 (cents, basis July). After that, we can stabilise and move back up," one said. Technicians feel support in the July raw sugar contract would be at 9.50 and 9.40 cents, with resistance at 10 and 10.50 cents.
Total deals done Thursday were at 164,994 lots, exchange data showed. Open interest in the No 11 raw sugar market rose 3,529 lots to 924,228 contracts as of June 5, it showed. The domestic No 14 sugar market showed the July contract up 0.02 at 20.96 cents at 2:54 pm. Volume traded Thursday in the No 14 sugar market hit 340 lots, the exchange said.