The price of raw sugar plunged to its lowest level in two years on Tuesday as speculative sales and news Indian sugar sales could exacerbate a glut took its toll on the market, analysts said.
Sugar prices were hit by investors moving positions out of the spot July raw sugar contract since it will go off the board at month's end and news India sold 200,000 tonnes of sugar to a Dubai refinery, reinforcing views a market glut may well increase.
"I wouldn't be surprised if we go lower on this," Marries Sonnet of trading firm Sonnen and Co said, adding the impact of India sales meant "the overall market will be even more oversupplied."
James Corridor, president of brokers Liberty Trading Group, said the Indian sale was "real bearish." "Some investors are bailing out and staying out (of sugar)," he said, adding importers who would want to book orders of sugar may opt to wait for further price falls.
The New York Board of Trade's key July raw sugar contract dove 0.36 cent or by 4.0 percent to settle at 8.56 cents per lb., trading from 8.96 to a new lifetime low of 8.50 cents.
Based on the spot contracts in the sugar market, the close is the lowest since trading around 8.50 cents in May 2005. The second positions October raw sugar contract fell 0.31 to 8.88 cents. The back contracts lost between 0.14 and 0.31 cent. The IntercontinentalExchange's NYBOT electronic market for sugar showed the July contract down 0.40 cent to a lifetime low of 8.52 cents at 1:33 pm.
Sugar contracts in New York edged up at the start to hit its high for the day, but the move quickly faded when investors stepped up the pace by which they moved positions out of July. Corridor estimated that 95 percent of activity in the market was in switch trade and around 5.0 percent in outright liquidation. Open interest in the July contract slid 12,975 lots to 331,151 lots as of June 4.
The contract expires June 29. Corridor and other analysts feel sugar prices, basis the spot July contract may fall to as low as 8.00 cents in the days ahead given the liquidation and bearish fundamentals it is facing. Technicians who trade sugar based on the performance of the market on their charts pegged support in the July contract at 8.50 and 8.20 cents, with resistance at 8.74 and 9.00 cents.
Open-outcry volume around noon was at 28,569 lots, from the previous tally of 27,987 lots. Call volume was 11,373 lots and puts 16,618 lots. NYBOT said on Monday's screen trade were 100,704 lots and total volume 128,691 lots. Open interest in the No 11 raw sugar market slumped 4,118 lots to 770,742 lots as of June 4. The ethanol market was unthreaded. US domestic sugar prices ended mostly lower.
The July contract fell 0.06 to 21.34 cents per lb. while September gained 0.02 to 21.15 cents. One contract aside, the rest declined 0.01 to 0.05 cent. Screen volume traded on Friday in the No 14 sugar market hit 377 lots and open-outcry deals amounted to 12 lots. On the electronic No 14 sugar market, the July contract fell 0.05 to 21.35 cents at 1:34 pm.