NEW YORK, Feb 9: CSCE sugar futures sagged to finish on Friday at a four-month low on a late burst of fund and local selling, with operators betting spot March will be testing the October 2001 trough of 6.11 cents by next week.
It’s still negative, Mike McDougall, vice-president of the Brazil desk at FIMAT USA Inc. here, said, adding the market’s outlook is glum because it has not been able to muster any sort of recovery the past few sessions.
Sugar has suffered badly from last month’s technical failure at 8.00 cents, basis March, which spawned massive fund liquidation in sugar.
The prospect of a huge 2002/03 cane crop from top sugar grower and exporter Brazil worsened the pressure on raws.
CSCE March sugar sank 0.10 cent to close at 6.18 cents a lb, near the bottom of its 6.15-6.37 cents trading band. It was the lowest close for sugar on a spot basis since Oct. 9, 2001, when it ended at 6.15 cents.
On Jan. 9, 2002, sugar settled at 8.03 cents. Since then, it has tumbled 23.03 per cent in value.
May lost 0.09 cent to end at 5.73 cents.
Back months shed between 0.06-0.09 cent.
An initial flurry which hoisted prices to their highs for the day was quickly scuppered by modest speculative pressure, floor sources said.
In the last 15 minutes of the session, the funds stepped up their sales pace and locals scrambled to jump in front of the market as it plunged.
That caused the market to collapse late although the volume involved was not that heavy, a floor dealer for a trading house explained.
Another dealer said one broker who normally acted for trade accounts sold up to 1,000 lots of March in the market near the close.
Analysts said the March raw sugar contract will likely take aim at the key support level of 6.11 cents next week with McDougall saying a lot of heavy stops are believed sitting at 6.10 cents.
Resistance, on the other hand, would now be at the Friday high of 6.37 cents, with the next level at 6.54 cents.
The likelihood of a further meltdown probably increased after the weekly CFTC commitment of traders’ data showed funds and small speculators with a net short position of 23,324 lots as of Feb 5, 2002, some 10,000 lots below what the trade had been expecting.
It’s a number that encourages weakness in the market, an investment house broker said, adding the funds and speculators can well go 45,000 lots net short as they did last October.
There’s nothing that says they should stop at 45,000 (lots short) though.
They said the funds and speculators would usually bottom out their short positions at 30,000-40,000 lots so the ability of the funds to hammer the market further may soon be limited.
Open interest in the number 11 sugar contract fell 325 lots to 205,094 lots as of Feb. 7. Interest has been rising sharply recently in what dealers said is an indication the funds were adding to their short positions.
A few months back, open interest in sugar stood at 120,000-130,000 contracts.
March sugar lost 0.20 cent to settle at 20.40 cents a lb while May rose 0.07 to 20.83 cents. The rest ranged from 0.05 cent firmer to 0.05 cent softer.
Estimated final volume reached 145 contracts, from the prior count of 373 lots.—Reuters
