By Allen Sykora
Of DOW JONES NEWSWIRES
Technically oriented selling sent sugar futures sharply lower Tuesday as the market fell through a couple of uptrend lines.
March sugar settled down 50 points at 21.91 cents per pound on ICE Futures U.S. The May contract finished 46 points lower at 20.87 cents.
"There has been some index rebalancing, concentrated yesterday but with some leftover rebalancing and selling of sugar today," said James Cassidy, senior vice president and head of the sugar group with Newedge USA.
Additionally, the market broke below a one-month uptrend line around 22.17, he said.
Another uptrend line in the March futures passed through the June and October lows and was around 22.25, said Jimmy Tintle, analyst with Transworld Futures. The market held this overnight but broke down through it around midmorning in New York.
The market got supportive news from Brazil's Sugarcane Industries Association, or Unica, Cassidy said.
"The market just bounced a little bit and failed," Cassidy said. "These failing bounces are leading to more technical pressure in a market that does not feel the presence of significant, imminent demand. Indian buying is perceived to be a bit distant."
Unica said Brazil's center-south 2009-10 sugar cane crush through Nov. 1 was up 7.23% from the same period a year ago.
However, due to rain, the level of sucrose per ton of cane is down 6.40% from a year ago. This means although more cane is being produced, less sugar and ethanol are being extracted, according to Unica.
"It looks like sugar is putting in a top," said Ron Coby, commodity trading adviser with Coby Lamson Capital Management. "It is making a series of lower high spikes."
March sugar peaked at 26.25 on Sept. 1, corrected lower and bounced back to 25.43 on Sept. 30. It corrected lower and bounced back to 24.68 on Oct. 19, then corrected lower and could get no higher than 24.00 on Nov. 3 and 4.
A close below 21.78 could signal further weakness, Coby said. This was the Oct. 28 low and was matched shortly before Tuesday's close.
One supportive influence at the moment is seasonal factors, Coby added. Sugar often rises into December, he said.
However, he said, sugar's price action has a strong correlation to late 2005 and early 2006, when it spiked higher but eventually fell back sharply.
ICE world sugar open interest--the number of active positions left at the end of the session--decreased by 9,528 positions Monday to total 764,367, according to exchange data.
Sugar electronic volume for Tuesday's session was estimated at 135,759 lots as of 2 p.m. EST (1900 GMT). In options, there was floor volume of approximately 26,677 calls and 11,686 puts, according to exchange data.
Close Change Range
March 21.91 dn 50 pts 21.78-22.70
May 20.87 dn 46 pts 20.71-21.62
-By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com
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(END) Dow Jones Newswires
11-10-09 1439ET
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