Raw sugar futures settled close to a five-month low on Tuesday on heavy fund selling, but persistent scale-down trade buying helped prevent deeper losses, dealers said. The New York Board of Trade's May raw sugar contract tumbled 0.09 cent to 8.52 cents a lb, after moving from 8.68 cents to 8.52 cents, the lowest level for the contract since early November. July futures slipped 0.08 cent to end at 8.76 cents. Deferreed delivery months declined from 0.08 to 0.11 cent.
"The funds are in a sell mode," said a New York desk trader, who estimated that up to 12,000 contracts were sold. "I'm guessing it is some long liquidation and new short positions.
"Sugar is very oversold on the technical indicators, but that doesn't matter to the funds," the trader added.
"We continue to see pressure despite talk that Libya maybe had bought some physical sugar, possibly whites," said Mike McDougall, senior vice president of the Brazil desk at FIMAT USA Inc.
Analysts and traders said fund selling emerged in force last week due to a resurgent dollar and fears the US Federal Reserve may ratchet up its battle against inflation. A firmer dollar weighs on sugar prices by deterring buying from traders holding foreign currencies.
"Right now, it's hard to pick a bottom, but the (trade and consumer) buying seems to be intensifying," McDougall said.
Fundamentals appear supportive to sugar with good demand and concerns about dry weather in leading cane grower Brazil, he added.
In recent weeks, sugar prices had been on an upswing due to bullish factors like a supply deficit and expected strong consumer buying from countries like Russia, India, Pakistan and China.
Chartists peg technical resistance in May raws at a double-top of 8.73 cents, and then at 8.90 and 9.00 cents, with support initially at 8.51 cents, followed by 8.40 cents. May sugar made a contract high at 9.58 cents in late January.
Ethanol futures settled unchanged again, with the April contract ending at 110 cents a gallon.
US domestic sugar futures were mostly lower.
May shed 0.03 cent to end at 20.54 cents a lb while July fell 0.02 to 20.62 cents. Back months were flat to down 0.02 cent.