Raw sugar prices closed at another 4-1/2 year high on Thursday as the sweetener gyrated wildly from bout of profit-taking and fund buying that vaulted the market to fresh contract highs, analysts said. The New York Board of Trade's key October raw sugar contract went up 0.02 cent to close at 10.22 cents a lb., moving from 10.04 to a new contract peak of 10.35 cents.
Based on the spot contract charts, it was the highest close for sugar since ending at 10.23 cents on January 16, 2001. The second position March contract increased 0.07 cent to also end at 10.27 cents.
Distant months gained from 0.06 to 0.12 cent. "The further we go up, the more uncomfortable we get," said Mike McDougall, senior vice-president of FIMAT USA Inc, adding many players were jittery as fund buying carved out new contract highs in sugar. "We're in uncharted territory."
Sugar had kicked off a robust rally due to strong consumer buying from countries like Pakistan and Russia, along with a steady round of purchases from the Middle East.
The rally was aided mightily by a fall in freight rates and estimates by many in the trade that leading producer and exporter Brazil had likely sold over half of its main sugar crop which would crimp its ability to sell into the advance.
Profit-taking dragged the market down to its lows and near support at 10 cents, basis October, but trade buying showed up at that level, dealers said.
Funds controlling large pools of investor money then took over and proceeded to lead the market to its highs. Once October got over 10.30 cents, the pace of producer selling accelerated and some speculators cashed in their gains.
"When that happened, we went back to unchanged," a trading house broker said. McDougall said that given the strength of fund buying in the market, sugar could crawl higher.
"It still has some upside to it," he said. Technically, the brokers feel the next level of resistance that could cap the rally in the October sugar contract is now at 10.35 and then 10.49 cents.
Support for the contract would be at 10 cents, then 9.95 and 9.86 cents. Volume traded before the close of business hit 57,282 lots, compared to the previous tally of 93,347 lots.
Call contract volume stood at 9,540 lots and put volume hit 5,407 lots. Open interest in the No 11 raw sugar market soared 9,858 lots to whopping 462,713 contracts as of August 3 as funds sharply expanded their long position in sugar.
Ethanol futures were not traded, with any quotes seen in the spot September contract. US domestic sugar prices ended mixed. The September contract rose 0.25 cent to close at 22.50 cents a lb. while the November contract shed 0.06 to 20.51 cents.
Except for one contract, the rest were flat to up 0.13 cent. Volume traded before the close of business hit 177 lots, versus the previous tally of 192 lots.