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Realization that India demand will remain slow and that extra sugar from India backing out of import deals (estimated at near 100,000 tonnes so far) has sparked a very bearish tone to the sugar spot market. Traders are fearful that washouts could increase to near 600,000 tonnes quickly if sugar prices don’t bounce as India buyers pay a stiff penalty and back out of deals. An official with the India Mills Association indicated that sugar supplies in India are comfortable and that the country does not require further imports. Spot prices in India have slipped to the lowest level since October. May sugar pushed sharply lower on the session yesterday and moved to the lowest level since early August. A strong US dollar, weakness in the energy complex and a higher production estimate from India are all factors which helped spark another round of long liquidation selling and the move under last week’s lows attracted additional selling pressure. Pakistan announced a tender to buy 200,000 tonnes of white sugar but this failed to provide much support and the speculator long liquidation selling helped drive the market lower. This selling continued in the overnight hours and May sugar is down as much as 358 points off of Monday’s highs and more than 1000 points (10 cents) off of the February 1st reversal top.
The COT reports on the weekend showed that speculators were still in a long liquidation mode and that speculators still held a massive net long position. Non-commercial traders (funds) still held a net long position of 153,218 contracts as of March 2nd. Russia imports in January came in at 82,600 tonnes from 12,700 tonnes last year as the import tariff is down and could slip further in the months just ahead.
TODAY’S GUIDANCE: Buyers could emerge on the break but for now, minor bearish news is snowballing to major long liquidation selling. A 50% retracement of the entire bull market of 2007 to 2010 comes in at 19.38 and this may now act as short-term resistance with 18.43 as next target.
