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CSCE sugar ends up in rebound, outlook glum

NEW YORK: CSCE sugar futures settled firmly Wednesday after a late flurry of speculative fund and local buying enabled raws to rebound although some players doubt if sugar can extend its gains over the next few days.

Ann Prendergast, softs analyst for Refco Inc., said the move to higher ground was likely fuelled in part by a modest uptick in physical offtake.

"Basically, it was all technical," she said.

March settled up 0.20 cent at 5.49 cents a lb, just below its intra-day peak of 5.50 cents. The session low was 5.31 cents. Tuesday, March settled at 5.29 cents, the lowest close for benchmark sugar futures since June 1, 1999, when it ended at 5.24 cents.

Second-position May rose 0.17 to finish at 5.68 cents. July gained 0.13 to 5.92 and the rest went up 0.08 cent except for October 2001 which rose 0.11 to 6.56.

The market held the lows at the start of business and was hovering near the 5.40-cent mark when it started spurting higher on the back of local and speculative buying, brokers said.

"It was mostly local shortcovering and there was one East Coast buyer which goosed up sugar near the close," a floor broker said.

Dealers said the market was treading close to oversold ground and it was only natural for sugar to bounce after futures were pounded over the past week or so.

"Psychologically, it's a bit oversold," one said.

It may be difficult for sugar to sustain its advance, though, given the softness in the physical market and bearish fundamentals hanging heavily over raw sugar prices.

"Fundamentally, there's no ground for it" to be at these levels, said Prendergast.

Another broker added: "It's just so hard to get sugar up these days. We may be here a day or two, but then we'll turn south again."

In other news, sugar dealers in Hong Kong said Wednesday that China, once a major importer of sugar, will not likely buy large amounts despite production losses of 500,000-700,000 tonnes since large domestic stocks can cover any shortfall in output.

Beijing's policy of allowing only limited imports of sugar for tolling will not likely change this year, one dealer in Shanghai said.

The only bit of physical business was news that Iran has tendered to buy 40,000 tonnes of raws and 14,000 tonnes of whites for March shipment.

In Asia, demand will likely be limited to purchases by Indonesia of mostly Thai sugar.

Technicians said support for March sugar would be at 5.10, the contract nadir of 5.06 and the psychologically important 5.00 cents mark. Resistance would be at the chart gap between 5.62-5.65 cents, they said.

Estimated volume was 18,784 lots against the previous estimated total of 25,208 contracts.

Call option turnover was estimated at 6,453 lots against the previous estimated total of 6,190 and puts were forecast at 4,563 from an estimated at 5,675 lots.

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