Sugar Review: Close Higher, Supported By Outside Markets

CE world raw sugar futures closed higher and near the session high Monday, supported by bullish "outside markets" - a rebound in crude oil prices, stronger U.S. equities prices and a weaker U.S. dollar.

May sugar closed up 11 points at 12.99 cents a pound, after hitting a weekly high of 13.04 cents on the day. July sugar closed up 8 points at 13.34 cents.

Sugar "has been quiet recently but is holding up pretty well," said Jack Scoville, vice president of Price Futures Group in Chicago. He added that tighter supplies of sugar worldwide are adding to underlying support to the sugar futures markets.
"The market is still bullish overall; at the moment it's a waiting game," said a New York-based desk trader. Analysts are eyeing equities as well as mixed news and opinions of India's sugar policy, said the trader.

The India April sugar contract traded lower Monday on higher supplies in a local market and sluggish demand. "Supplies have improved substantially after the recent measures taken by the government" to allow duty-free import of raw sugar, said Tejas Seth, analyst at SMC Commodities.

More than 80% of the sugar mills in Uttar Pradesh, India's second-largest producing state, closed down operations for the crop year ending September 2009 due to unavailability of cane, a senior industry official said Monday. The state's total sugar production is likely to fall 25% to 4.7 million metric tons in the crop year, said the official.

In other news, seven companies have made bids to take a stake in Brazil's second-largest sugar and ethanol company, Santelisa Vale S.A., local newspaper Valor Economico reported Monday. The newspaper reported that offers were received from Bunge Ltd. (BG); Louis Dreyfus; investment fund BTG; and ETH Bioenergia, the energy unit of Brazilian conglomerate Odebrecht; as well as from GP Investments Ltd. (GPIV11.BR) and Sao Martinho S/A (SMTO3.BR) in a joint bid.

Brazilian sugar and ethanol giant Cosan SA (CSAN3.BR), which on Friday acquired rival sugar group Nova America, also made a bid for Santelisa Vale, which is saddled with 3 billion Brazilian reals ($1.2 billion) in debt, the newspaper said.

In London trading overnight, Liffe white sugar futures traded lower and steadier after sharp upward moves in recent sessions. A large Brazil crop continues to keep downward pressure on the market. "Followers of seasonality suggest that the 2Q is usually relatively weak in the sugar market, as it's a period when Brazil gets on with pricing their new crop," said Jonathan Kingsman, analyst at Kingsman SA.

Large noncommercial traders - essentially the funds - cut their net long position in ICE sugar futures and options in the week through March 10. Funds were 58,250 lots net long compared with 66,037 lots net long the prior week, according to CFTC data. Funds trimmed 9,819 long positions and 2,032 shorts. Index traders also reduced their net long position to 164,894 lots, from 165,838 lots the week before. Traders added 1,592 short positions and 648 longs. Specs reduced ICE sugar longs as futures slid to monthly lows.

ICE futures volume was estimated at 80,807 lots, with 9,720 calls and 3,877 put options traded.

source: marketwatch