Author: Michael Ferrari, PhD
VP, Applied Technology & Research

Following an extended trend of upward futures behavior that lasted for most of the last month, ICE sugar futures (Mar10) have now retreated back down to below the 22-22.5 cent mark, with a sharp drop seen at the end of last week. This dip puts the spot contract below the 50d moving average, and may provide opportunity for a short term play on the Mar10 contract.

This also plays into the outlook on the Mar10/May10 spread, which has narrowed further in the last few sessions. The closer we get to Nov09 expiration, the more we will see speculation on global supplies for the first half of 2010 move the market, and as long range outlooks are still not necessarily favorable in many of the world’s major origins outside of Brazil, we do anticipate the spreads for all late 2010 contracts to widen. The current global SST anomalies shown above (CDC monthly anom.) are still supporting the continuing development of El Nino, and while it may not be a strong event, dryness across many cane origins should dominate the pattern through early 2010.