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On Monday, the August sugar in London was at the lowest level since April and New York second month sugar moved to a near 3 year high yesterday as aggressive fund and speculative buying emerged to support. There was a lack of commercial selling overhead and the trade quickly assumed that a large commercial trader was ready to accept delivery of July sugar and ship to India. India tightness after the poor crop for the 2008/2009 season of just 14.7 million tonnes has provided solid support to the market and traders recall quickly that a large commercial took delivery of 16,579 contracts in the May delivery and this was seen as a positive factor at that time as the market knew that the sugar had a home. Given the technical break-out yesterday, tightness in India, a slow start to the India monsoons and the market working off of a world production deficit this season and next; it won’t take much in the way of positive news from outside markets to spark more buying. October sugar moved to a new contract high and July sugar is back near the May highs with yesterday’s rally as aggressive buying from speculators and funds helped to support strong gains on the session. The outlook for a world production deficit for the coming year and a slow start to the India monsoon season were noted as positive forces. Ideas that the recent set-back in prices was enough to correct the overbought condition of the market and may have also sparked buying from India helped to drive the market higher and a firm tone to the energy markets added support.
TODAY’S GUIDANCE: Close-in support for October sugar comes in at 16.80 and 16.42 with 17.40 as next upside objective. Beyond that, the May 2006 highs at 18.00 could be considered as another target.
