ICE sugar climbs most since March on short-covering

May 07, 2013

ICE sugar
ICE sugar

ICE raw sugar futures posted their largest daily gain in two months on Monday, on short-covering and technical strength, while ICE cocoa edged down, consolidating after touching a near five-month high last week, dealers said. ICE arabica futures gained, supported by expectations that the Brazilian government would increase its minimum coffee price and establish a floor for sinking global prices.

Trading volumes were relatively light, as Liffe soft commodities markets were closed for a British public holiday and ICE held a delayed opening for coffee, cocoa and sugar markets due to the British holiday. Raw sugar futures on ICE Futures US rose 0.28 cent, or 1.6 percent, to settle at 17.81 cents a lb. It was the spot-contract’s largest daily rally since early March.

A climb to about 17.80 cents a lb triggered automatic buy stops, pushing sugar to an intraday high of 17.90 cents per lb, the highest level in about two weeks, dealers said. The July ICE contract on ICE touched as low as 17.18 cents a lb last week, pressured by expectations of ample global supplies. Raw sugar found technical strength after failing to retest the recent lows on Friday and then surpassing a resistance level in the range of 17.50 cents to 17.60 cents a lb, which prompted limited short-covering, dealers said.

“Given that the trade and origin hold a large short (position), there may be less selling pressure above the market, and we’re more prone to a short-covering bounce,” said Michael McDougall, a vice president for Newedge in New York.

Speculators increased a net short position in raw sugar futures and options to bring it to the largest level in three weeks in the week that ended April 30, US government data showed on Friday. Those short-covering rallies may be muted, however, as expectations of record global output and the ramping up of cane crushing in top producer Brazil overhang the market and could further pressure prices, they said. Trading volumes were slightly below average, at about 84,000 lots, compared with a 30-day average of about 89,000 lots, preliminary Thomson Reuters data showed.

Cocoa futures on ICE settled down $14, or 0.6 percent, at $2,402 per tonne, consolidating after touching a fresh high during the previous session of $2,437 per tonne, the highest price since December. “We’re attempting to have a price correction here. The market has not had much resistance and we’re overdue. The speculator interest has been very, very strong,” said Sterling Smith, a futures specialist with Citigroup in Chicago. The second-month contract has rallied more than 18 percent from a low of $2,034 in early March.

Limited concern over the size and quality of West Africa’s mid-crop had prompted cocoa to start rebounding from that low, dealers have said. Speculators have boosted their bullish stance in cocoa futures and options, lifting it to a near five-year high. Open interest hit a record for a fourth straight session on Friday. Last week, the July contract surpassed its 200-day moving average, a technically bullish indication. Trading volumes were light, at about 11,000 contracts compared with a 30-day average of nearly 25,000 lots, preliminary Thomson Reuters data showed.

ICE July arabica coffee futures gained 0.85 cent, or 0.6 percent, to finish at $1.4175 per lb. About 16,000 lots were traded, compared with a 30-day average of about 23,000 lots, according to preliminary Thomson Reuters data. ICE coffee has rebounded from a three-year low of $1.3270 touched last Monday.  Source Reuters

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