ICE May sugar futures fell on monday on profit taking

KANSAS CITY -- ICE May sugar futures fell Monday, giving up early gains after profit-taking developed to take prices south of unchanged, brokers and analysts said.
Nearby May sugar fell 13 points to settle at 13.41 cents a pound, near the 13.37-cent session low.

"We saw some profit-taking in sugar after the dollar firmed," said Joseph Ricupero, a broker/analyst at MF Global.

"Sugar has been overbought, and in the last two weeks open interest has climbed almost 73,000 lots," he said. "So the funds have been getting back in again."
The sugar market also met technical resistance once prices pushed up into the 13.50-13.60 range on the May contract, handing momentum to market bears.

Bearish technical traders then pushed May down into a chart gap that extends to 13.31 cents. May forged a session low and new three-week bottom of 13.37 cents, leaving a small $6 gap on the chart.

Traders and analysts continue to point to mostly constructive fundamentals for sugar, and an early rally on Wall Street combined with a weak dollar lifted prices to near the top of the trading range.

May hit an early high of 13.67 cents on mostly speculative fund buying.
India's 2009-10 sugar output is expected to rise to 20 million metric tons, as farmers increase plantings on improved prices. This year, however, India's production is expected to total only 15.5 million tons after a growing season filled with adverse weather.

India's annual sugar consumption totals 22.5 million tons, and the country is expected to import about 1.5 million tons in 2008-09 to meet demand. Indian mills have so far imported about 1.3 million tons.

China's 2008-09 sugar output is expected to be down 13% at 12.95 million tons from the 2007-08 season, industry group China Sugar Association said. Decreased fertilizer investment after a surge in prices last year led to significant crop damage.

Given expectations for higher prices, Chinese sugar officials don't expect planted area to decline in 2009-10.

Commodity funds added 12,128 contracts to sugar futures and options in the week to March 17, increasing their net-long position to 71,726 lots, up from 58,250 the previous week, the Commitments of Traders report showed. Funds also decreased shorts by 1,348 contracts.

Funds are 8.2% net long, versus 6.9% last week.
ICE world sugar open interest increased by 10,218 lots to total 681,726, ICE reports. ICE sugar volume for the session was estimated at 65,570 lots, according to exchange data. In options, approximately 13,199 calls and 10,158 puts traded.

source: marketwatch