Sugar Rebounds From Seven-Month Low as Speculators Slow Sales

Sugar rebounded from a seven-month low on speculation that managers of hedge funds and index funds slowed sales after reducing their net-long positions, or bets prices would rise, to the lowest level of the year.

Prices in New York are down 40 percent from a 29-year high on Feb. 1, and net-long positions as of March 9 fell to the lowest level since December. Sugar’s plunge “has been one of the quickest that I’ve seen for any commodity,” said Michael McDougall, a senior vice president at Newedge USA.

“We are heavily oversold,” McDougall said from New York. “The fact that we closed above where we opened today, barely, could be a sign that we could be due for a turnaround.”

Raw-sugar futures for May delivery rose 0.09 cent, or 0.5 percent, to 18.33 cents a pound on ICE Futures U.S. in New York, the first gain of the week. Earlier, the price fell to 17.66 cents, the lowest level for a most-active contract since July 21.

The dollar fell for the second straight day, dropping as much as 0.3 percent against a basket of six major currencies today. The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 1 percent, led by cocoa, corn and wheat. A weaker dollar can boost the investment appeal of some commodities.

“The fact that the dollar index has weakened and commodities have reacted to this should provide some indirect help” to sugar, McDougall said. “The fact that it has not had much of an effect lately shows you how damaged the market is.”

In 2009, sugar futures more than doubled as adverse weather lowered output in Brazil and India, the world’s largest producers of the sweetener.

The International Sugar Organization said last month that global output will trail demand by 9.4 million metric tons in the 2009-2010 season, wider than a previously estimated deficit of 7.3 million tons.

By Elizabeth Campbell
Source: Bloomberg