Raw sugar prices rose on Monday to end at their highest level in nearly 10 years as fund buying and news the US will increase its sugar import quota sparked a rally in the sweetener that shows no signs of abating, brokers said.
The New York Board of Trade's benchmark spot March raw sugar contract jumped 0.40 cent or 3.1 percent to end at 13.26 cents a lb., ranging from 12.97 to a new lifetime high of 13.29 cents. It was the loftiest close for sugar on the spot weekly charts since 1996.
If sugar eclipses 14 cents, it would be the highest since it surpassed 15 cents in 1995. The price of sugar has nearly tripled since trading less than 5.00 cent in the first part of 1999. The second position May sugar contract surged 0.43 cent to finish at 13.22 cents, having also hit a contract peak of 13.25 cents.
All of the back contracts posted new lifetime highs and finished the day by rising from 0.30 to 0.44 cent. James Cornier of Liberty Trading Group said the market surpassed a target in March of 13.25 cents and the sweetener appears poised to claw its way higher in the days ahead.
Analysts said the rising use of cane to produce the bifocal ethanol, a shortfall in supplies for the third season running, drought and lower sugar production in key exporter Thailand, and EU reforms which will cut its sugar production has stoked a robust rally in the sweetener.
News the US will increase its sugar import quota in 2005/06 by 450,000 short tons, or by 408,233.13 tonnes, sparked an advance in New York's sugar pit. "You just can't stop the funds at this time.
This whole rally is feeding on itself," a dealer for a European brokerage house said.
Open interest in the No 11 raw sugar market has ballooned to an all-time record. According to NYBOT, open interest in the market rose 2,563 lots to an all-time high of 508,319 lots as of December 2.
The final volume traded stood at 50,877 lots, from the previous tally of 56,857 contracts. In the options pit, the amount of call contracts hit 23,001 contracts and put volume reached 22,013 lots.
Technicians feel resistance in the March contract, the area where the market may pause due to concentrated selling pressure, would be at 13.50 cents, with support at 13 and then 12.77 cents.
The ethanol futures market was unthreaded.
US domestic sugar prices ended sharply higher, tracking the reaction to the USDA announcement more forcefully than the global sugar market.
The January contract soared 0.90 cent to end at 22.25 cents a lb and March surged 0.59 to 21.90 cents.
The back months ranged from unchanged to 0.57 cent higher. The final estimated volume hit 429 contracts, from the previous tally of 46 lots.