News that India is prepared to import as much as 1.5 million tonnes, the first import since the 2004/05 season, failed to cause much of a stir in cash markets and the news sparked long liquidation selling in futures. A major trade house indicated that 2009/10 sugar production from Brazil’s center-south region (which represents 90% of their total) could jump 5 million tonnes. The possibility that Brazil will shift some of their anticipated record cane crop for the 2009/10 season to sugar production and away from ethanol is the primary reason that the impact of India importing 1.0-1.5 million tonnes may not be as bullish as traders suspect. Keep in mind, economic conditions are exceptionally poor for what is traditionally the world’s number-one importer, Russia. In addition, traders see India production bouncing back this season from a very poor crop in the 08/09 season. Cash traders also do not seem too concerned with the purchase as Thailand and Australia seem to have sugar available on the world market. It seems as if the sugar market needs bullish outside forces such as a weaker US dollar or indications that recessionary pricing for commodities will shift to inflationary pricing to see follow-through to the upside. If not, the market looks vulnerable to increased technical selling and long liquidation selling ahead. May sugar saw follow through selling after Tuesday’s dramatic sell off late in the session yesterday as traders continued to take profits following confirmation India planned to lower export duties. Chart based selling also seemed to kick in on a push below the recent consolidation support area. The market had become overbought following a rally to the highest price level since early October. As a result, the market seemed to pay little attention to a forecast by the Indian Sugar Mills Association calling for a 2009/10 global sugar deficit of 7 to 8 million tonnes.
TODAY’S GUIDANCE: A 50% retracement of the August to October break leaves key resistance for March sugar at 13.14 and the action this week and last week suggests the resistance might hold. At this point, a move under 12.51 could spark an aggressive long liquidation sell-off.