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CSCE sugar ends off as market rally derailed

NEW YORK: CSCE sugar futures finished easier Monday as all-around sales scuppered a three-day long speculative fund inspired surge which had taken key March within striking distance of the 6.00 cents mark.

"This close is as negative as Friday's close was positive," Patrick Funaro of FIMAT Futures said. "It's technically bad."

March sugar slipped 0.13 to close at 5.66 cents a lb, and near the bottom of its 5.63-5.94-cent trading range.

The market had risen 0.40 cent or by 7.42 percent of its value in the preceding three sessions as it approached the year high of 5.84 cents on Jan. 7. The last time it closed above 6.00 cents was on Nov. 18 at 6.04.

May SBK0 lost 0.14 to 5.78 cents and July SBN0 fell 0.11 to 5.99 cents. The rest slipped 0.09 cent each.

Sugar had been called to start as much as 0.20 cent higher, basis London, but failed to do so and merely edged up on steady speculative fund buying, floor sources said.

"The scale-up selling increased in volume" as sugar made its way higher, said Funaro.

With producers starting to unload in heavier fashion, sugar began falling under the weight of speculative profit-taking and liquidation once March touched the session peak of 5.94 cents, they said.

"There was just no follow-through. When the buying thinned out a bit, it really came off. We really broke quickly when we got below 5.80 (cents). It was like a free-fall," a veteran floor broker said.

Funaro said that once March filled a downside gap between 5.80-5.85 cents, that prompted more selling in the market.

Traders are a bit confused though about the near-term direction of sugar futures.

Funaro said a close above 5.80 cents in March over the next few days would mean a possible move toward 6.20 cents but a settlement below 5.55 may herald a slide to the 5.20 cents area.

Another broker said March sugar would at least need to poke its nose above the 50-day moving average at 5.76 cents to spur further speculative shortcovering in the market.

A close below the 20-day moving average at 5.50 would be greeted with dismay, he added.

Funaro said the technically driven market dealings will persist "until we get a better view of what (top importer) Russia will do and what the Brazilian crop looks like."

Physical demand, while steady, is not nearly enough to offset the overriding bearish fundamental of plentiful supplies.

"I don't think the physical market is going to give us much of any help," a dealer said.

Technically, traders said they feel resistance in March sugar should be at the 50-day moving average of 5.76 and then the session peak of 5.94 cents. Support was pegged at 5.60 cents and then the 20-day moving average of 5.50.

Estimated volume traded in the CSCE sugar market reached 37,484 lots from the previous estimated total of 27,182 lots.

Call volume touched an estimated 4,473 lots while put volume reached around 1,765 lots.-Reuters