Raw sugar futures settled softer Thursday as the market consolidated after springing to a three-week high, with analysts saying groundwork was being laid for a further rally in the coming weeks. James Cordier, founder of optionsellers.com and analyst for Liberty Trading Group, said the market saw some profit-taking but the sweetener seemed to be gathering itself for a new rally to push prices higher.
"It has a chance (to get to) 12 cents (basis October)," he said. "That looks very possible." The spot July raw sugar contract declined 0.18 cent to end at 10.41 cents per lb, trading from 10.28 to 10.70 cents. On Wednesday, the contract shot up over 8.00 percent to end at 10.59 cents in the loftiest close for the market since ending at 10.60 cents on May 21.
The now benchmark October contract shed 0.09 cent to close at 11.55 cents, dealing from 11.34 to 11.69 cents. Volume in the July contract amounted to 58,982 lots as of 2:16 pm EDT (1816 GMT). On a fundamental level, the market is digesting surpluses built up in the last two seasons. Analysts said a small deficit in 2008/09, increasing demand, lower production in major grower India and use of the alternate fuel ethanol should pad sugar values.
The market is also expecting to unwind the remaining positions in July. Open interest in that contract was at 194,798 lots as of June 11, from the previous tally of 224,511 lots, according to exchange data.
Sugar crept higher at the start, but soon lost appetite and came off before staging a late recovery. "It got quiet after yesterday's wild action," a dealer said, adding the attention will turn on Friday to options expiration and the desire by some investors to keep July near 10.50 or even 11 cents. Technicians put support for July delivery at 10.25 and 10 cents, with resistance at 11 cents.
Total deals done Wednesday came to 260,359 lots, exchange data showed. Open interest in the No 11 raw sugar market rose 3,237 lots to 922,301 contracts as of June 11, it showed. The domestic No 14 sugar market showed the September contract up 0.48 cent at 22 cents at 2:17 pm. Volume traded Tuesday in the No 14 sugar market hit 611 lots, the exchange said.