Raw sugar futures finished on Tuesday near a three-year peak on fund buying, switch trade and expectations a major trade house will take delivery of sugar when the July contract expires next week, brokers said. The key October raw sugar contract climbed 0.74 cent, up 4.55 percent on the day, to finish at 16.98 cents per lb.
On the weekly second position charts, it was the highest finish for sugar since July 2006. The contract ranged between 16.11 and 17 cents. Volume traded in the October contract stood at 110,037 lots at 2:15 pm EDT (1815 GMT). Spot July sugar went up 0.79 cent to end 5.24 percent higher at 15.86 cents. Alex Oliveira, senior sugar analyst for brokers Newedge USA in New York, said the rally is being fuelled by technical buying in the market.
The rally is being aided by expectations a trade house "is going to take the sugar" when the July contract goes off the board on June 30, he said. Analysts said the implication of a trade house taking delivery is that underlying demand for sugar remains robust. Open interest in the July contract was at 90,341 lots as of June 22, down 15,390 lots from the previous session. Brokers believe open interest in the July contract is down to 75,000 to 85,000 lots by the close on Tuesday.
Brokers said deliveries will depend on the spread between the spot July and second position October sugar contracts going into next week. A total of 842,252 tonnes or 16,579 lots was delivered at expiration of the May contract. Normally, large deliveries are seen as bearish for sugar futures, but the May delivery was looked on as bullish because the trade felt the sugar had a home in India.
Technicians put resistance in the October contract at 17 cents. They pegged support at 16.50 and 16 cents. Volume traded Monday in the No 11 sugar market was 145,605 lots, from the prior 97,730 lots - the exchange said. Open interest in the No 11 sugar market was at 750,454 lots as of June 22, from the prior 748,888 contracts - exchange data.