Since last week’s collapse, the market has stabilized for three days in a row with talk of the short-term oversold condition of the market and some light concerns on the supply outlook due to weather uncertainty helping the market to slow the long liquidation selling seen recently. May sugar closed slightly lower on the session yesterday after trading a relatively tight, 23-point range. Heavy rains in the Center South region of Brazil could delay early harvesting progress, but the new season does not typically get started before early April. A double dose of bearish news for sugar comes from the outlook for a record cane crop from Brazil (as well as higher production in India and Europe and Thailand) and plus a shift to a higher percentage of Brazil’s cane crop expected to be used for sugar and not ethanol. There is also talk that China may impose a duty on sugar imports as soon as March 22nd. India’s Food Minister has upgraded his sugar output forecast to 22 million tonnes or more, calling the Indian Sugar Mills Associations’ estimate of 20.3 million tonnes too low. The Minister also commented that there is no shortage of sugar in India and that there is no need to import sugar in 2016-17.
TODAY’S MARKET IDEAS: The sharp drop in crude oil prices leave Brazilian millers in a position to shift more of their cane input to sugar production as opposed to ethanol, and this just adds to the short-term bearish supply outlook for sugar. Keep in mind that large and small specs combined still held a net long position of 163,992 contracts in the last COT update, so the talk of the short-term oversold condition of the market does not carry much weight. Resistance for May sugar is at the 18.50-18.68 zone with 17.96 and 17.57 as next support.