ICE sugar futures eased to a three-year low on Monday as selling on theoptions market added pressure, while the firm pound triggered a short-covering rally in cocoa, with both markets attracting heavy volume as spread activity picked up. Arabica coffee climbed from the lowest level in more than three years.
July raw sugar on ICE inched down 0.12 cent, or 0.7 percent, to settle at 16.43 cents a lb. It dipped earlier to 16.41 cents, the lowest level for the front month since July 2010, pressured by expectations for a huge cane harvest in the centre-south of top grower Brazil.
Total volume soared to nearly 144,000 lots, 50 percent more than the 250-day average, preliminary Thomson Reuters data showed, with dealers citing active July/October spreading. “We’re not too far from hitting (sell) stops, that’s my understanding,” said Alex Oliveira, sugar trader for Newedge USA, adding that if the market goes lower, automatic sell orders are likely to take it down even further.
Dealers said there was heavy open interest in raw sugar put contracts on the options market at 16.50 cents per lb. That caused the futures market to gravitate to that area, which is viewed as support. Open interest for futures on May 31 climbed by nearly 2,500 lots to 907,805 lots, the highest since June 2008. Options open interest rose by 6,219 lots to 492,936 lots, the highest since February 14, ICE data showed.
“With the slow and sliding price action and little by way of credible/investable bull story, it seems the market is consigned to slip slowly rather than quickly,” said Tom Kujawa, of broker Sucden Financial Sugar. “We think we are going to continue sideways to lower and expect new lows over the session.” August white sugar on Liffe closed down $1.20, or 0.3 percent, at $476.10 a tonne.