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The sugar market still looks poised to move to a higher price level as production difficulties in both Brazil and India have provided the fundamental support and a weak US currency and firm crude oil prices have added to the bullish posture. India has flooding concerns in the countries third largest producing state and now there are some concerns in the countries largest producing state that further heavy rains for another 3-4 days could hurt the cane in Maharashtra and heavy rains are anticipated over the next day. Brazil cane areas seem to be drying out with mostly dry conditions and a few light showers expected each day into the weekend. Brazil ethanol prices have pushed higher in recent weeks to the highest level since April of 2007 but sugar production returns are still well above ethanol which should keep the concentration on sugar production. Flex-fuel vehicles (8.5 million) now account for near 36% of the fleet in Brazil from 28% in August of 2008. March sugar bounced to close moderately higher on the session yesterday with an inside trading day. The market recovered only a small part of the sharp break off of last week’s highs. Traders remained concerned with the slow pace of Brazil cane harvest due to too much rain and also from concerns that the India cane crop may be revised lower if flooding problems persist. A weakening US dollar provided some support and so did the positive action in the US stock market. These same factors also supported the higher trade overnight. Open interest as of October 2nd was 770,093 contracts, up 4,427 contracts from the previous session. Now that the October is expired, open interest could re-build. After recent heavy rains, the Mexico cane harvest appears to be unaffected and traders see the harvest beginning in October and production of near 5.1 million tonnes as compared with 4.96 million last year. Mexico officials recently decided not to import an additional 350,000 tonnes due to expected tightness after last year’s lower than expected production.
TODAY’S GUIDANCE: Close-in buying support for March sugar comes in at 24.10 and 23.88 with 25.30 as resistance and 27.89 as next upside objective.
TODAY’S MARKET IDEAS: It should not take much in the way of support from outside forces to see a resumption of the uptrend.
