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21.06.2007
Sugar extends gains
LONDON (Thomson Financial) - Sugar extended gains in a recovery from what traders believe to be an oversold position and as players digested news that India will increase the amount of the commodity it holds in buffer stocks.
However, market participants said there is little chance that sugar, the world's worst performing commodity this year, will break out of the downward price trend amid a mounting global surplus.
'I think the strength in London is more technical than anything else, the market has been very oversold. Looks like we're going to test the upper range of the downtrend channel ,' said John Boyden, a trader at Ambrian Commodities Ltd.
At 1.12 pm, white sugar for October delivery was up at 312.50 usd a tonne on the Euronext Liffe exchange, against 310.40 usd at the close yesterday.
Analysts said India's decision to raise buffer stocks to 5 mln tonnes from a previous 2 mln tonnes was expected, although it does mean an extra 3 mln tonnes not available for export.
On the other hand, however, the country's crop is expected to rise to around 28 mln tonnes by September this year, against just 19 mln tonnes in 2006, leaving a large market surplus.
'It's a difficult time for sugar producers at the moment. At this stage sugar prices will probably go significantly lower until you squeeze the new entrants and existing producers out of the market ,' said Boyden.
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