Chicago: Sugar fell, erasing last week’s gains, on speculation producer selling may have outweighed demand by investors such as index funds that are boosting stakes in commodities.
A price rally to a one-year high may have spurred sugar producers in India, the second largest maker, to add to “the mountain” available for sale, Jeff Bauml, managing director for BNP Paribas Commodity Futures Inc. in New York, said on Friday. In the week ended 1 January, hedge fund managers and other large speculators increased by 21% their bets sugar would rise, according to US Commodity Futures Trading Commission (CFTC) data.
“I have heard that over the past three to four days the Indians have sold a significant amount,” said Ken Holtzman, president of New World Futures in New York. “You are running into producer and trader selling.”
Sugar futures for March delivery fell 0.6% to 11.32 cents a pound (Rs4.48 for 0.45kg) on ICE Futures US, formerly known as the New York Board of Trade.
“The market right now is insanely long,” Holtzman said.
Speculative long positions outnumbered short positions by 190,158 sugar contracts on ICE Futures in the week ended 1 January, CFTC said on 4 January. Net-long positions rose by 33,254 contracts.
“Given the recent sharp rise in prices the market seems overbought and vulnerable to a downward correction,” Helmut Ahlfeld, managing director of F.O. Licht in Ratzeburg, Germany, said in an email.
The price on 8 January reached 11.78 cents, the highest for a most-active contract since 29 December 2006.
“We tested that recent high and the market is backing off because of less buying interest,” said Boyd Cruel, an analyst with Alaron Trading Corp. in Chicago. While sugar has seen “massive sums of fund money pouring into the market since January 1,” speculative and index-fund buying may wane, and the price might touch 10 cents as the expiration of the March contract nears, Bauml said.