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A firm dollar this week and ideas that India tightening supply may not be as serous as fist believed leaves the market vulnerable to some additional short-term long liquidation selling from speculators. The market experienced an early rally yesterday led by higher energy and a firm stock market but there was a lack of new interest from speculators and demand concerns helped to pressure. Demand concerns emerged from the talk that the May sugar has lost significant ground to the July contract in recent weeks with July at a 9 point premium on February 26th as compared with a 67 point premium yesterday. With bear spreads working well, traders are concluding that spot demand is weak. May closed slightly lower on the session yesterday but more than 25 points off of the early highs and moved to the lowest level since March 12th. Vietnam sugar production is expected to fall near 17% this year to 951,000 tonnes. Ideas that India may not need to import white sugar at zero duty and that imported raw sugar needs may not be as high as expected helped to pressure the market. Premiums traded for Thailand sugar on the world market fell to near 40-50 points over New York this week as compared with 65 points over last week. With cheap freight and the Brazil harvest just around the corner, traders see a lack of tightness on the world market for exportable surplus sugar despite the outlook for a world production deficit. Ideas that world demand may not be as robust as anticipated added to the long liquidation trend.
TODAY’S GUIDANCE: The market seemed to have the fundamentals to move out of the recent consolidation early this week but the failure leaves futures vulnerable to long liquidation selling from the spec. Tonight’s COT report may give traders a better indication of the extent of the overbought condition.
TODAY’S MARKET IDEAS: May sugar close in resistance is at 12.96 and if 12.75 can not hold as support, a 50% correction of the Oct-Feb rally leaves next support at 12.38.
