Short term sugar opportunities
May09 sugar futures have been sliding since last week following market news describing a potential rebound in Indian production coupled with lower projections for crude oil futures. However, $50+ crude is still expensive oil making cane-derived ethanol an attractive option for Brazilian mills. In addition, despite additional sugarcane plantings by opportunistic Indian growers, the longer range weather pattern has not improved for either of the country’s primary cane belts – any increased anticipated production will be limited by water availability. The current WTI market view (today’s move into lower 12 cent territory notwithstanding with May at 12.16 at the time of this writing,) is that the current fundamentals have sugar futures underpriced for both May and July. There is justified support for May09 futures to move back to the 12.55 to 12.9 cent range, and Jul09 shows fair value between 12.85 and 13.2 cents. Our discusseions have stated several times in recent weeks when trading was seen in the upper 13 range, that sugar was overvalued, and profits at those levels should have been taken. Current levels provide another favorable entry point for May.
