Raw sugar futures settled on Friday at a three-week low on follow-through investment fund sales and the market's weak tone could lead to further declines into next week, brokers said. The October raw sugar contract fell 0.22 cent or 2.1 percent to finish at 12.49 cents per lb, dealing from 12.42 to 12.81 cents. It was the lowest close for sugar on a spot basis since ending at 12.04 cents on June 30.
Volume traded in the October contract was at 37,856 lots at 2:15 pm EDT (1815 GMT). Mike McDougall, senior vice-president of FIMAT USA Inc, said sugar was hit by the same type of profit-taking, which depressed other soft markets hit sugar as well. For the most part, dealers said sugar has tracked crude as it rallied and then sold off this week.
Sugar has been linked to oil prices because spikes are seen prompting producers led by top grower/exporter Brazil into manufacturing more of the alternate fuel ethanol. On Thursday, several analysts said the sugar market may slip further if the October contract goes under 12.45 cents, with the 11.25 cents level next.
Fundamentally, sugar is supported by rains, which have affected yields in Brazil, lower Indian output, more ethanol exports by Brazil, and a steady rise in consumer demand. The countervailing factor is a supply overhang, uncertainty over the dollar and the unpredictable nature of investment funds who may be in love with sugar one day and cannot wait to dump it the next.
Technicians put support in the October contract at 12.45 and 11.25 cents, with resistance at 13 cents. Total deals done Thursday was at 123,054 lots, exchange data showed The domestic No 14 sugar market showed the September contract down 0.50 cent at 24.25 cents per lb at 2:15 pm. Volume traded Thursday in the No 14 sugar market hit 783 lots, exchange data showed.