DJ Nybot Sugar Review: Rallies To 24-Year Highs; Shorts Cover NEW YORK (Dow Jones)--World raw sugar futures raced to 24-year highs Friday on the New York Board of Trade, crashing through layers of resistance as trade houses and funds bought in heavy volume and shorts rushed for cover. Trade houses bought the March/May spread. The options ring was active.
Brokers said they expect still-higher prices and were dusting off old price charts from 1980 and 1981 for guidance.
Nybot March settled up 103 points at 17.15 cents a pound while May closed up 97 points at 16.90c.
"March gapped up through the 1990 high of 16.28c on the open, touching stops and drawing in fund buying," a floor broker said. "Trade houses were buying and covering shorts, and they bought the March/May spread. Locals bought, took profits, and bought again."
Options-related activity was seen in futures as March scaled 16.50c and 17.00c.
At midmorning, March rushed to 17.21c and May to 17.00c, the strongest levels since mid-1981. After some profit- taking, the front months returned to those levels in final action. Later months scored new contract highs.
"We're looking at even-higher targets," the floor broker said.
Objectives of 18.00c, 19.00c and 20.00c were being tossed around Friday, and traders pointed out that the 1981 high was 33.85 cents and the 1980 peak almost 45 cents.
The March/May spread closed at March 25 points over after settling at 19 points over on Thursday.
Futures volume was estimated at 152,000 lots. In the options ring, 15,724 calls and 25,878 puts traded.
"Funds, end-users, the trade, everyone was buying," a desk trader said. "Shorts did a lot of covering. It was crazy and the sky seems to be the limit now."
Brazil's center-south region is devoting 52.5% of its cane output to ethanol and 47.5% to sugar in 2005-06, according to the Sao Paulo cane industry group, Unica.
Brazilian industry members said that with world sugar prices likely to continue rising in the center-south's inter-harvest period from January to April, millers will want to make more sugar from cane, but they cautioned that the switch from ethanol to sugar output isn't as easy as outsiders believe.
Center-south ethanol shortages are expected in April and May, and some growers will start the next harvest early to meet demand and benefit from high prices.
U.S. sugar companies and the U.S. Sweetener Users Association this month asked the USDA to raise the nation's fiscal-2006 import quota again, following a December increase, since domestic supplies are tight after hurricanes Katrina, Rita and Wilma trimmed cane output.
Industry talk persists about Chinese and Iranian physical purchases this month and Russian buying in futures. Syria is looking for raws and/or whites on Feb. 8.
Nybot's ethanol committee early next week will look at ways to revamp the exchange's cane-ethanol futures contract, which fizzled after an early 2004 launch.
Other commodities and the CRB Futures Index rose Friday.
Nybot March faces resistance at 17.22, 17.25, 17.30, 17.35 and 17.40 cents.
Nybot March world options expire on Feb. 10. Last trading day for the March contract is Feb. 28.
