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The market managed to surge higher on the last session of the year but the short-term fundamentals are still somewhat uncertain. It appears the market is in a period of weaker world demand for sugar and while stocks are expected to tighten this season, the short-term supply looks plentiful. It may take a major move up in the crude oil to see much follow-through from Wednesday’s short-covering bounce. There seems to be a general consensus that commodity markets could show some strength in 2009 and this may have provided the spark for the jump in sugar and many other commodity markets to end the year. March sugar pushed sharply higher on the session for the last trading day of the year and even tested the December highs. The shift from sharply lower to sharply higher on the session in crude oil helped to spark speculative buying and then the market saw aggressive short-covering to drive futures to the highs. Strength in the US dollar did not seem to matter much to the bulls as the near-term focus is on energy prices and solid gains in the stock market which ignited speculative interest in other commodities. A lack of interested commercial sellers allowed the market to run higher with light buying. March sugar closed at 12.13 and nearby futures closed at 11.32 on December 31st, 2007. The longer-term fundamentals are still in a positive set-up but the short-term fundamentals remain cloudy and the technical set-up shifted to slightly more positive this week as futures rejected a move lower. Speculators hold a hefty net long position in sugar and the market has stayed in a relatively wide consolidation since early October while the open interest has inched lower.
