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The market seems to be in a set-up to move higher over the short run as India buying and the potential for imports to continue into the 2009/2010 season should help provide underlying support. Some traders believe India will need as much as 3 million tonnes and with low freight rates and high premiums from Thailand, India may be active at booking Brazil sugar. The Brazil harvest is increasing and traders will begin to monitor the weather which is favorable for the next week. The market moved from sharply lower early yesterday to close moderately higher on the session. Speculative buying emerged when the US stock market held and pushed higher on the day, the US dollar weakened and the energy markets held. Buying support emerged in other commodity markets as well and July sugar closed near the high end of a 46 point range after posting a 7-session low. India buying emerged to help support the market as India’s National Agriculture cooperative Marketing Federation plans to import 25,000 tonnes in May and another 50,000 tonnes of white sugar in June. The India government does not believe sugar production will fall below 15 million tonnes while industry representatives believe production will be near 14.2 million tonnes from 26.5 million produced last year. The USDA attache believes India will need to import more sugar (2.5 million) in the 2009/2010 season. Outside market forces look relatively quiet today and a return to focus on sugar fundamentals may be seen as a positive development. The expiration of the May contract next week may also be a factor that puts short term pressure on sugar, as some traders suspect deliveries against the May contract could be heavy due to Brazil producers’ need for cash. The International Sugar Organization recently raised its global 2008/09 deficit forecast to 4.3 million tonnes.
TODAY’S GUIDANCE: A 50% correction of the July to October break for October sugar leaves key support at the 13.81 level. Close in support today comes in at 13.94 with 14.37 as resistance.
