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CSCE sugar rallies to end at 5-mth high on funds

NEW YORK: CSCE sugar futures surged anew to end Friday at a five-month high in a fund-led rally into stops which overwhelmed producer and trade selling, as prices charged north for the fourth straight business day.

"It was a steady performance throughout the session," Jim Cassidy, first vice-president of FIMAT Futures USA, said. "Predominantly, it was fund buying."

Key July sugar SBN0 closed at a fresh year and session peak of 6.35 cents a lb, a rise of 0.14 cent on the day. The day's low was at 6.15 cents.

Benchmark sugar shot up for the fourth straight session and touched its highest level since November 16, 1999, when it ended at 6.56 cents.

Sugar prices have risen 9.48 percent in the last four days. The benchmark sugar price has soared 30.12 percent in value since hitting a recent low of 4.88 cents at end-February.

Spot May sugar gained 0.07 to settle at 6.23 cents. The rest popped up 0.11 cent each, with October finishing at 6.54 cents.

Sugar opened weakly, as expected, and then turned around as steady fund, some trade and option-related buying drove it to higher territory, analysts and floor sources said.

On two occasions, origin selling tried to beat sugar back, but the funds came in each time to stop any retreat.

"Origins were selling on scale. The jobbers were trying to catch a correction," said Cassidy.

Brokers said the level of origin pricing was not as heavy, with the Thais backing away in the hope of seeing higher prices.

"The origins always hope to catch this at the peak but they always seem to miss out on this kind of move," one said.

Market participants said sugar prices seem poised to make a run to the next target of 7.00 cents even though the technical indicators appear overbought, with a nine-day RSI reading of 76. A reading above 70 normally means an overbought market.

The long-term outlook of Prudential Securities made available Friday said the presence of constructive factors in the market should enable sugar to firm to the 7.00-7.50 cents level over the next three months.

Analyst Arthur Stevenson said that despite the presence of burdensome stocks projected at roughly 34 million tonnes by the USDA, the emergence of some friendly data has sparked hope among market bulls.

This would include severe frost damage to China's cane crop, which may lead to a spike in imports, and expectations of smaller crops in the southern hemisphere, with top grower and exporter Brazil's vital centre-south cane harvest seen falling 10-20 percent.

"In terms of the next three months...we lean to the upside based on our view that early global 2000/01 supply/use considerations point to a more balanced statistical profile," said Stevenson.

"We anticipate that nearby futures will reach the 7.00- to 7.50-cent level over the next three months; (but) given burdensome stock levels, a more bullishly posture seems unjustified," he added.

Analysts said they feel near-term resistance in July sugar is at 6.45 and then 6.56 cents. Support should emerge at 6.05 cents, 6.00, 5.75 and then 5.64 cents.

Estimated final volume reached 45,895 lots against the previous estimated volume of 46,346 lots.

Option expiry on Friday was fairly active with call volume touching an estimated 9,564 lots while put volume reached an estimated 5,300 lots.

The CSCE is a subsidiary of the New York Board of Trade.-Reuters