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CSCE sugar settles firmer, trade mulls next move

NEW YORK: CSCE sugar futures finished higher on Thursday, but key March failed to close above an upside chart gap when robust producer and trade sales capped the market's advance.

March sugar filled an overhead gap from 5.62-5.65 cents as it charged at the opening to the session peak of 5.68 cents on the back of speculative fund buying into stops.

The market fell back on origin pricing as it slid to the session nadir of 5.54 before recovering to end 0.11 up at 5.61 cents a lb.

May gained the same to 5.75 cents, July rose 0.08 to 6.00 cents and the rest were 0.05 cent steadier each.

Most market players felt the close was less than encouraging, pointing to the failure of March to settle within the gap or above it.

"It's stuck between intractable fundamentals and very little consumption," Refco Inc. softs analyst Ann Prendergast said. "There's very little dynamic in the market."

She added that while the close may be "moderately discouraging," it would not prevent players from tying to drive March sugar past the near-term target of 5.70 cents over the next few sessions.

A physical broker for a major investment house here said the market has risen 0.22 cent, or by 4.08 percent, over the last two sessions despite the robust amounts of origin sales and sugar should be poised for a further advance.

"There's less vulnerability from the producer side in this thing," he said. "I think we're headed to 6.00 cents."

James Cordier, broker for Liberty Trading Group, said it would be vital for March sugar to pierce the 40-day moving average at 5.72-5.73 cents to encourage the funds to be more aggressive in covering their short positions in sugar.

He estimated open interest in the market had risen 40,000 lots over the last 90 days, with most going into establishing shorts in sugar futures.

"A close over 5.73 (cents) would cause a shortcovering rally. Until we do that, it's very much a bear market rally," said Cordier.

He added the contract must make its move soon, especially since March may soon be hit by fund rolling since it is going off the board on February 28.

Technically, traders said they feel resistance in March sugar should be at 5.70 and then at 5.72-5.73 cents. Support was pegged at 5.50-5.55 cents.

Estimated volume traded in the CSCE sugar market reached a hefty 36,074 lots against the previous estimated total of 16,223 lots.

Call volume touched an estimated 3,898 lots while put volume reached around 1,718 lots.

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