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The market has seen weak technical action in the last several weeks until the turn higher on Friday which seems to have set a near-term bottom. India demand appears to be higher than trade expectations and traders are also seeing a tighter supply from China and other key consumers which might begin to rekindle a bull trend into early 2010. The technical action is improving and outside market forces look positive. Statements from India’s Farm Minister this week suggests imports of near 7.5-9.5 million tonnes of sugar this season which would be well above trader expectations thought to be near 5 million tonnes. With the Brazil harvest all but complete, traders also indicate that excessive rains may have lowered the yield. In addition, India industry officials are questioning the 16 million tonne forecast for India production as yield may not be as high as expected. India produced just 14.7 million tonnes last year and 26.3 million two years ago with consumption thought to be near 23-24 million tonnes. March sugar closed slightly higher on the session yesterday but well off of the early highs. Strength in the metals and a sharp rally in the stock market along with a sharp break in the US dollar helped support the market early but there was a lack of aggressive buying from speculators and the market stayed inside of Monday’s range. Brazil exported 1.85 million tonnes of sugar in November as compared with 1.7 in October and 1.413 million tonnes last year. Ethanol exports, however, were just 193,700 liters from 326,400 in October and 506,200 liters last year. Traders also see a production deficit in China of near 2 million tonnes this season due to poor weather in the summer and this may also be a positive development; especially if China begins to import sugar.
TODAY’S GUIDANCE: The market seems to have clearly rejected a lower price level with the action on Friday. To show follow-through support, March sugar needs a move over 23.12 which will turn the chart pattern a bit more positive. A move through the downtrend channel resistance at 23.57 today may also attract new buyers. Support for March sugar comes in at 22.36 and 22.23.
