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The market has consolidated near the 28 year highs for the last 5-6 weeks and it will probably not take much in the way of positive news from the sugar market or from outside market forces to spark additional buying from speculators. The market has corrected the overbought condition and higher prices may be necessary to pull sugar from storage and give producers the incentive to produce more next year. Perhaps we have already reached a price level to encourage a surge in production next year but a further collapse in the dollar and strength in the gold market are beginning to provide for the support to see another test of the September 1st highs or even another leg up. Pakistan production for 2008/09 fell to just 3.2 million tonnes compared to 4.7 million tonnes the previous season as producers shifted to other crops. March sugar closed moderately lower on the session yesterday as speculative appetite for buying commodities was active but other commodities attracted new interest. A sharp drop in the dollar helped provide a solid bounce off of the early lows but ideas that new commercial buyers are waiting for a more significant set-back to buy helped pressure. Traders believe India production will be only 15-16 million tonnes this year from usage thought to be near 23 million tonnes and this has helped provide underlying support. Russia has refined 293,900 tonnes of white sugar from beet by September 14th, down 34.7% from last year. The Russia Sugar Producers Union believes production will reach 3 million tonnes from last year’s record of 3.5 million tonnes. Indonesia has indicated that the country will allow the import of an extra 445,000 tonnes of raw sugar this year in an attempt to ease record high local prices. As of September 1st, the trade minister had issued permits to import 1.81 million tonnes and the country hopes the extra sugar will cool prices.
TODAY’S GUIDANCE: March sugar support comes in at 22.96 and 22.72 with 24.10 and 24.60 as resistance. A move through resistance would suggest a resumption of the uptrend which could support a run all the way to 27.89.
