Raw sugar futures closed down 2.3 percent on Wednesday, on technical selling and the expectation that buying from top consumer India has eased, pulling the market off Tuesday's 28-1/2-year top, traders said. The key October raw sugar contract dropped 0.56 cent, or 2.3 percent, to settle at 23.68 cents per lb. The October contract moved in a wide 0.99-cent trading range from 23.42 to 24.41 cents.
October contract volume reached 56,414 lots. March sugar fell 0.58 cent to finish at 25.01 cents. Raw sugar futures dropped sharply on follow-through weakness from Tuesday, when the market turned sharply lower after hitting a 28-1/2-year high at $1.2485 per lb, basis October - traders. The technical reversal attracted long liquidation pressure - traders. India is experiencing its worst monsoon season in around 40 years, causing a smaller cane crop and increasing the top sugar consumer's demand for the sweetener, the driving force behind the recent rally.
Indian sugar importers have stopped signing new contracts because of high prices and strict government limits on stocks, but the world's top consumer of the commodity is expected to resume buying as demand is robust. The expectation for a decrease in buying from India also played a significant roll in the market's fall - traders.
"Further moves to the downside in sugar are going to be driven by equities prices but I think right now the overall theme that's taken us down in reaction to all the outside market forces being bullish is the industry specific news out of India," Klopfenstein.
The International Sugar Organisation on Wednesday raised its 2009-10 global sugar deficit forecast and saw falling stocks driving a further rise in prices from the 28-year peaks set earlier this week. Volume traded Tuesday in the No 11 sugar market was at 157,683 lots, from the prior 127,462 lots - exchange data. Open interest in the No 11 sugar market was at 864,670 lots as of September 1, from the previous 863,349 contracts - exchange data.
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