Look at crude to signal a reversal for sugar
May09 sugar futures had a strong week last week as the sweetener benefitted from the broad upward move across the commodity complex. The rally in both crude oil and grains helped support higher ICE sugar futures, and most of last week was spent in territory above the 13 cent mark. On the global supply side, the recent precipitation pattern across Brazil’s Centre-South has been favorable for cane, and the WTI forecast is on track for March. Soil moisture, particularly in eastern Sao Paulo’s fields have benefitted from this (see USDA map above right) pattern, which looks to continue for the next two weeks. We talked last week about lower moves in crude to support a bearish sugar pattern; as crude is still showing strength, we are using this as the primary gauge for a potential reversal. Our market view is that the current fundamentals support May09 futures in the 12.9 to 13.2 cent range, acknowledging short term upside potential. We feel that current price levels are overvalued, and even though we could see higher sugar futures in the coming sessions, taking profits ahead of a reversal may be a favorable strategy.
