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Weakness from outside market forces may spark some selling pressures today, but the trend appears to have turned up in sugar and corrective breaks look like buying opportunities. It will take a major change in the sentiment for the US dollar to drive traders away from commodity markets, and sugar is a market with additional upside potential due to a tightening supply scenario into 2010. Brazil weather is getter wetter, and this should slow harvest, while prices in India are moving higher, which may attract increased import activity. Nearly 5,000 Indian farmers protested state-controlled sugar prices and forced parliament to close. Talk of lower yield in key India producing regions and hopes that other importers, such as Pakistan or Indonesia, will get more active in sugar soon has added to the positive tone. Pakistan’s production of sugar this season is expected to be close to 3.0 million tonnes compared with consumption forecasts of 4.2 million for consumption. Traders expect import activity soon. March sugar advanced above Monday’s high yesterday to its highest level since November 5th. This included a late morning rally that tacked on one more modest new high for the day. The early rally coincided with a lower dollar, higher crude oil and a new record high in gold. These markets moved in the opposite directions overnight and sparked a selling spree in many commodity markets, and sugar was no exception. On top of the Brazilian and Indian issues, the market was supported by reports of crop damage in Australia from the El Nino situation.
TODAY’S GUIDANCE: Bearish outside market forces early today may cause some profit-taking, but buyers are likely to be active on a corrective break. Wetter weather in Brazil and improved demand from India look to help support a continued short term uptrend and possibly another leg higher in sugar into 2010. Buying support for March sugar comes in at 22.89 and 22.63 with 24.30 and 24.85 as next upside targets.
