Raw sugar futures finished Friday with sharp losses when changes in large fund indexes pressured prices at day's end, sparking stop-loss sell orders on the way down, traders said. Early producer selling pushed prices down, but was met with speculative support. But in the last hour, as funds started to bail out of some sugar holdings, traders said they drew other speculative sellers into the fray.
The New York Board of Trade's March raw sugar contract fell sharply to close 0.28 cent lower at 8.71 cents a lb. The range extended from 9.01 cents down to 8.69, its lowest level in three weeks. May sugar finished 0.25 cent lower at 9.01 cents.
The rest ended with 0.09 to 0.22 cent losses.
When March sugar went down to 8.88 cents a lb support on the first trip, it held because of heavy trade bidding in the March/May spreads, said one dealer.
Later on, however, some funds began selling heavily to unload some sugar positions after their index weightings changed. The commodity index funds began their 2005 reweighting program this morning.
The indexes typically get reweighted every year from the fifth to the ninth business day.
Longer-term fundamentals remain strong, traders said.
Sizable global supply deficits are forecast for the 2005/06 crop at a time when demand is expected to remain vibrant. With global shipping rates coming down, analysts point out that sugar users effectively realised a price discount, which is helping spur purchases.
Sugar 11 volume jumped to 67,318 lots from Thursday's count at 28,424 lots. Friday's call volume shot up to 13,379 lots, with puts at 6,129 lots.
Open interest in the No. 11 sugar market rose another 3,343 lots to yet another record high at 385,432 lots at Jan. 6.
Ethanol futures closed flat, with the February contract at 95 cents a gallon.
US domestic sugar ended unchanged to lower on Friday.
March finished 0.01 cent lower at 20.59 cents a lb, and May stood unchanged at 20.60 cents. The rest closed from down 0.02 cent to even.
Sugar 14 volume came to 594 lots, from 634 previously.