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The market looks poised for another leg higher as the tightening stocks situation will not go away until the spring and end user buyers have turned much more active on the recent set-back in prices. This would suggests a new solid support zone near 22.50-22.00 and we believe the market is likely in search of a new resistance zone which we believe will be near the 28.00-30.00 zone. The world ending stocks/usage situation is as tight or tighter than the rallies seen in the early 70’s and the 80’s when tops were near 60 cents and 45 cents. More rain is in the forecast for the center-south region of Brazil this weekend which will slow harvest progress again and could also keep sugar yields lower than normal. Traders believe that nearly 10% or near 50 million tonnes of cane will be left in fields for next years’ harvest at the current pace of harvest. March sugar pulled back on profit taking yesterday as the market seemed to hit a wall of resistance prompting some traders to book profits following a strong rally over the previous four sessions. It was a bit surprising to see sugar fall back despite a number of critical outside markets providing bullish influences. But with the underlying fundamentals still very bullish, price corrections in sugar are likely to be shallow. India’s farm minister forecasted the country will see a 7 million tonne supply deficit in sugar for the 2009/10 season with imports still likely to leave a supply shortfall of as much as 4 million tonnes. Despite high prices, Pakistan plans to import 500,000 tonnes each of raw and refined sugar. For the 09/10 season, Pakistan is expected to produce near 3 million tonnes with consumption thought to be near 4.2 million. Sugar exports from Brazil in October reached 1.705 million tonnes from 1.889 million in September and 1.524 million tonnes last year. Ethanol exports were just 326,400 liters as compared with 370,800 in September and 481,200 liters last year in October.
TODAY’S GUIDANCE: It will be the second year in a row of a major world production deficit and tightening stocks.
