Raw sugar futures relied on follow-through investment fund buying to end higher Tuesday and analysts believe the market is positioning itself for another rally in the weeks ahead, analysts said. The March raw sugar contracts climbed 0.53 cent to end at 23.97 cents per lb.
The contract traded from 23.12 to 24 cents. March contract volume traded was at 48,631 lots at 2:06 pm EST (1908 GMT). Sterling Smith, an analyst for brokers Country Hedging Inc in Minnesota, said sugar is poised to move higher. He pointed to the small cane crop in top consumer India and the excessive rains, which have pummelled the cane crop of top producer/exporter Brazil.
"We have not seen the high price in sugar," Smith said, adding a move to 32 cents by early next year seems likely. His views on India were underscored by news that spot sugar prices in that country surged 5.0 percent to a fresh peak Tuesday due to a rise in retail demand and estimates of a deficit for a second year running.
The Indian government said the worst annual monsoon rains in 37 years and could lead to further imports of sugar. The other bullish factor is news that Brazil's Sugarcane Industry Association said heavy rain will result in almost 10 percent of the cane crop in the main center-south region staying in the fields.
Hussein Allidina, head of commodity research at Morgan Stanley, told Reuters in Paris at an ethanol conference that raw sugar prices could hit 30 cents around December 2009 to February 2010. Raw sugar prices shot up to a 28-1/2 year high during the summer and a move to 30 cents or beyond would represent the highest level in nearly 30 years.
Technicians put resistance in the March contract at 24 and 24.50 cents, with support at 22 and 21.50 cents. Volume traded Monday in the No 11 sugar market was at 77,303 lots, from the prior 73,394 lots - exchange data. Open interest in the No 11 sugar market was at 772,416 lots as of November 2, from the previous 771,866 contracts - exchange data.