Raw sugar prices settled lower on Tuesday on speculative sales and profit-taking as the market retreated from near an 11-year high and brokers said the sweetener may drift right into the holiday weekend.
The New York Board of Trade's benchmark March raw sugar contract fell 0.12 cent to end at 14.21 cents a lb, moving from 14.15 to 14.42 cents.
On Monday, the contract ended at 14.33 cents in the highest close for sugar on the spot weekly charts since trading around 14.50 cents in 1995. May sugar shed 0.13 to 14.30 cents. The rest lost from 0.04 to 0.09 cent.
"It's probably going to hang around here until Christmas and probably take a shot at 14.50 (cents, basis March), but no more than that," a dealer for a brokerage house said.
Sugar has risen to levels that are the best in nearly 11 years due to aggressive buying by funds in control of large pools of funds, the rising use of cane to produce ethanol, drought in key exporter Thailand, EU reforms that will cut European sugar output, and tight supplies, analysts said.
The supply gap was underscored by news that Paris-based broker Jonathan Kinsman said on Tuesday that the world 2005/06 sugar deficit was estimated at 3.52 million tonnes, up from a prior forecast of a shortfall of 2.21 million tonnes.
Futures started at its highest level for the day and then came under pressure from speculators who cashed in their gains from the recent rally in the market, dealers said. Buying by the trade and small speculators kept the market near unchanged until a late flurry of speculative sales dragged sugar contracts down at the close, they said.
Technicians see resistance in the March contract at 14.50 and 15 cents, with support at 14 and the area around 13.80 cents.
Open interest in the No 11 raw sugar market fell 1,024 lots to 525,007 lots as of December 19. Volume before the close stood at 26,741 lots, from the previous tally of 46,080 contracts. Call volume reached 12,705 lots and put volume reached 8,817 lots.
There were no trades in the ethanol market. US domestic sugar prices ended higher. March rose 0.30 cent to 21.90 cents a lb. and may add 0.23 to 21.88 cents. The rest were flat to up 0.27 cent. Volume before the close hit 368 contracts, from the previous 544 lots.