Raw sugar futures got hit late by speculative liquidation to finish sharply lower on Friday as prices bounced around like pinballs while traders and players tried to sort out the impact of an exchange order to a Brazilian firm curbing its ability to give orders in the market, brokers said.
Futures swung from highs near 13 cents in the key March contract to just above 12 cents in frenetic trade ahead of a holiday weekend. The market will be shut Monday to honour the memory of US civil rights martyr Martin Luther King. Trading resumes Tuesday.
The March electronic sugar contract was 0.21 cent lower at 12.24 cents per lb at 1:13 pm EST (1813 GMT), moving from 11.80 to 13.03 cents, with traded volume in the contract at around 151,091 lots. The March open-outcry contract fell 0.46 cent or by 3.6 percent to end at 11.99 cents per lb, dealing from 11.88 to 12.95 cents. May dropped 0.42 to 12.41 cents and the rest lost 0.33 to 0.47 cent.
James Cordier, founder of optionsellers.com and analyst for Liberty Trading Group, said it was difficult to pin down the impact of the exchange order against Brazilian firm Fluxo because of the "opaque" nature of the sugar business.
Traders said it was tough to track what brokers acting for Fluxo may be doing because electronic business does not show who is doing what when. "I think some of the specs and players decided they wanted to get the market to 13 (cents) and then bailed like crazy. Is it a Fluxo-inspired move. (I'm) not sure. The best you can say is the market is digesting what happened and then we'll figure out next week what likely happened," one explained.
Open interest in sugar hit a record as investment funds poured into a sugar market that most believe is undervalued. Open interest in the No 11 raw sugar market soared 27,498 lots to a record 1,099,519 contracts as of January 17. A trader said the market should take note of the size of the open interest when considering the Fluxo issue.
"I think their position is maybe 50,000 to 80,000 lots. The funds will have more to do with what happens in the market than Fluxo doing their thing," the dealer said. Final open-outcry volume was 31,201 lots, compared with the previous tally of 16,890 lots.
Call volume was at 119,566 lots and puts hit 100,025 lots. Screen trade Thursday hit 306,728 lots and total volume was 323,618 lots. The US electronic domestic No 14 sugar market, showed the March contract 0.06 cent lower at 20.15 cents at 1:16 pm. Screen trade Thursday was 93 lots while no lots were traded in the pit, the exchange said.