Raw sugar prices closed on Friday near a five-year high on solid trade buying and the market is seen punching higher in the weeks ahead due to bullish fundamentals, brokers said.
The New York Board of Trade's October raw sugar contract sprang up 0.10 cent to end at 10.43 cents a lb, dealing from 10.30 and a new lifetime peak of 10.55 cents. It was the highest close on a spot basis since sugar ended at 10.87 cents on October 20, 2000.
Active March added 0.07 to 10.88 cents, trading for the second session in a row at a new contract high of 10.94 cents. The rest increased from 0.09 to 0.23 cent.
Mike McDougall, senior vice-president of FIMAT USA Inc, said an initial round of trade buying powered the market to its highs before some profit-taking pruned its advance.
"Back month buying has been remarkably strong," he said, adding a surge in ethanol prices in the US will likely add more fuel to the market's rally.
Sugar has surged to a level last seen in 2000 over fear that top grower Brazil will use more of its cane to churn out ethanol given the steep rise in crude prices.
Consumer buying is also expected because most will not wait for higher prices to book their orders, the analysts said.
After slipping ever so slightly at the start, trade buying catapulted sugar in a session that likewise featured players transferring positions out of October before it expires in two weeks' time, brokers said.
Open interest in the October contract slid 16,727 lots to 98,796 contracts as of September 15 while interest in March went up 19,258 contracts to 266,413 lots.
Technicians feel resistance in the October contract is at the contract high of 10.55 cents. Support was at 10.25 and in layers all the way to 10 cents.
Estimated volume before the close of trade stood at 96,134 lots, from the previous 119,299 lots. Call volume amounted to 4,366 lots and puts hit 7,350 lots.
Open interest in the No 11 raw sugar market rose 3,406 lots to 470,819 lots as of September 15.
Ethanol futures finished steady, with the September contract ending at 275 cents a gallon. US domestic sugar prices ended sharply higher. November surged 0.31 cent to 21.31 cents a lb and January gained 0.18 to 20.93 cents. The rest increased 0.03 to 0.18 cent. Volume traded prior to the end of business reached around 1,392 lots, from the previous 1,031 lots.
Frank Jenkins of Jenkins Sugar Group said tight supplies of refined sugar in the US may have finally caused the market "to boil over" in a rally.