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CSCE sugar finishes softly as rally sputters

NEW YORK: CSCE sugar futures settled lower Tuesday as raws reeled from robust fund sales and origin pricing to short out a rally that allowed the sweetener to charge to a one-month peak in the previous session.

May sugar lost 0.14 to close at 5.28 cents a lb, trading from 5.39-5.17 cents.

On Monday, it had surged by 0.20 to end at 5.42 cents a lb, the highest close for benchmark sugar since February 11, 2000 when it settled at 5.49 cents.

July SBN0 came off 0.11 to 5.31 cents and October fell by 0.15 to 5.68 cents. The rest were 0.14 cent easier each.

"We've been chopping around. It's backing and filling," Salomon Smith Barney analyst Walter Spilka said, adding sugar futures seem to be in a transition from a bearish outlook to a more neutral posture given most analyst expectations the global sugar balance in 2000/01 may improve a little.

Salomon is a unit of financial giant Citigroup.

"The evidence for a sizeable cut in global production appears to be growing," trade house ED & F Man said, adding a fall in the key Brazilian centre-south cane harvest could be slightly larger than the 5.0 percent forecast earlier.

The European Union could also see a 500,000-tonne cut in production quotas while Australian cane has been hit by flooding, Man added.

Sugar defied pre-opening expectations it would head north and instead turned tail as fund selling and overhead origin pricing hammered raws down to its lows, brokers said.

But the selling pressure dried up as local shortcovering and trade buying conspired to pare the market's losses.

"It's disappointing, but it's not a total failure," a physical broker said. "I would have been more happier if May had finished above 5.30 (cents)."

Over the very short-term, Man said the prospect of heavy Thai pricing has yet to hit the market and the prospect of Russian purchases drying up does not augur well for futures.

"As a result, the market is expected to test levels below the recent contract low of 4.84 cents, basis May," Man said.

It said a good portion of Russian demand will likely be covered by Cuba because Guatemalan and Thai origins suffer from duty discrimination and higher freight rates, respectively.

On a technical basis, dealers said they feel short-term resistance in May sugar would be at the 40-day moving average of 5.38, the 50-day moving average at 5.49 and then 5.50 cents. The next level would be around the 5.70 cents area.

They said support should be at 5.00 cents, 4.90, the contract low of 4.84 cents and then 4.50 cents.

Estimated volume reached 21,812 lots, against the previous estimated volume of 31,013 lots.

Call volume touched an estimated 2,844 lots while put volume hit an estimated 2,632 lots.

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