The anticipated rebound in May futures occurred
May09 ICE sugar futures had a very strong move up on a combination of spec buying and covering short positions, putting the nearby once again above the 13 cent mark. Activity on the energy and equities spaces helped with last week’s rally, which as of early Monday, appears to be following through into this week. Even if crude oil scales back to $50 (WTI crude just above 50 at this writing), this is still (relatively) expensive crude, and there is an incentive for Brazil to produce more cane ethanol, thereby reducing sugar production. Readers of this newsletter are aware that we have been expecting a rebound in the sugar market, advocating increasing long positions whenever the nearby moved to the low to mid 12 cent range. Currently, May is at 13.20, and if positions were entered anytime over the last few weeks when May was trading at or below 12.5, the result should have been positive performance. At this stage, we would advise to be a bit more cautious with May expiring in three weeks, and attention should be focusing on Jul/Oct, still watching for short term May opportunities. The weekly precipitation forecast has not changed much at the major origins, so weather is bullish in the short term. We see fair value for May09 futures to stay around 13 cents, and Jul09 at the mid 13 cent range.
