Raw sugar futures bucked a sell-off in the commodity complex to settle at a year high and the market is poised to punch higher based on the strength of its performance on Wednesday, brokers said. ICE Futures March electronic sugar contract was 0.22 cent higher at 11.69 cents per lb at 1:23 pm.
EST (1823 GMT), moving from 11.30 to a new lifetime high of 11.94 cents, with traded volume in the contract at around 77,286 lots. The March open-outcry sugar contract rose 0.30 cent to end at 11.77 cents per lb, trading between 11.30 and 11.93 cents. Based on the spot closing charts, it was the highest finish for sugar since December 2006.
May gain 0.22 to 12.14 cents. The rest went up 0.14 to 0.21 cent. "It's very impressive," James Cordier, founder of optionsellers.com and analyst for Liberty Trading Group, said. It seemingly lends credence to the idea that many of the key producers have already sold their sugar since "there is very little hedge pressure to keep sugar down," he added.
Traders said talk swirled in the market an exchange order forced a Brazilian sugar producer to cover shorts accounted for the initial comeback in sugar. Others said the ability of the market to hold the lows and the fact that sugar is seen as undervalued compared with other commodities provided funds an opportunity to buy it back again after selling off earlier in the session.
"It's a mixed bag. The producer covered his shorts and that stabilised sugar. Funds looking to increase their holdings in sugar, the sell-off turned into an opportunity to pile in again," one analyst said. Analysts who take part in a Reuters poll said buying by investment funds will combine with lower production in major producer India and an expanding biofuel industry to buoy sweetener values in 2008.
Today, sugar tumbled at the start in line with weakness in other commodity markets. But that soon abated going into the last hour of business and the market sprang up, dealers said. "What is notable about sugar is that with everything else red on the board, it is now green and that should mean higher prices this week," one explained.
The bullish mood of the funds could be seen from the relentless rise of open interest in sugar futures. Open interest in the No 11 raw sugar market rose 883 lots to record 1,079,223 contracts as of January 15. Open-outcry volume around 7,642 lots. Call volume was at 23,040 lots and puts hit 11,155 lots.
Screen trade on Tuesday hit 94,976 lots and total volume was 102,618 lots. The US electronic domestic No 14 sugar market showed the March contract 0.04 cent lower at 20.20 cents at 1:28 pm. Screen trade on Tuesday was 199 lots while no lots were traded in the pit, the exchange said.