World sugar prices closed in on 3 ½-year highs, continuing recent bullish momentum on worries over Indian production and delays to the Brazilian harvest.
The price of the nearby October world sugar contract tacked on 0.02 cent, or 0.1%, to 18.45 cents a pound on the ICE Futures U.S. exchange.
[india] AFP/Getty Images
An Indian youth carried a pot as he walked across the dried-out bed of Upper Lake, Asia’s largest artificial lake, west of Madhya Pradesh state capital Bhopal in May. A dry monsoon season has boosted sugar prices.
Buying by speculative funds, or those big investors that don’t take physical delivery of the underlying commodity, sent October sugar to a session high of 18.57 cents a pound, the highest price since February 2006.
Prices reversed course somewhat when market participants moved to book profits.
Continued worries over India’s 2009-10 sugar crop because of an unusually dry start to the annual monsoon season, coupled with rainy weather in Brazil, encouraged the buying, said Fernando Martins, a broker/analyst with Newedge Group.
India experienced the driest June in 83 years, and four of its 28 provinces have declared drought. Now it is a waiting game to see if the rains, while later than normal, will salvage most of the crop.
[Sugar Futures]
India is the second-largest sugar producer in the world and the largest consumer of the crop. The country is expected to face back-to-back production shortfalls, and thus greatly increase its imports.
Rain in Brazilian sugar cane areas is delaying the harvest, offering the ICE sugar market further price support. Mills in the states of Parana and Mato Grosso were forced to stop harvesting and missed deliveries as a result of the wet conditions.
Brazil is the world’s top producer of sugar.
Many traders and analysts remain bullish on sugar futures, though prices have reached technically overbought levels and may be due to trade lower. The relative strength index rose to 72% after Friday’s close, an indication the market has become overbought.
A high-volume close above 18.75 cents a pound for October sugar may prompt the bulls to push prices up to near 20 cents, said Jimmy Tintle, analyst at Trans-World Futures.
Otherwise, sugar prices may consolidate in a range of 18.25 to 18.75 cents in the near term, he said.
In other commodity markets:
CRUDE OIL: Prices rose slightly, as a weak stock market slowed, but failed to stop, a rally that has lifted oil prices in eight of the past nine trading days. Light, sweet crude for September delivery rose 33 cents, or 0.5%, to $68.38 a barrel on the New York Mercantile Exchange.
NATURAL GAS: Prices fell as traders took profits after prices rose on Friday, and as mostly mild weather and ample inventories continued to pressure the market. Nymex gas for August delivery fell 9.1 cents, or 2.5%, to $3.604 a million British thermal units, after reaching a low of $3.555 a million British thermal units earlier in the session.