After reaching the mid 15- cent level last Thursday, fueled in part by last week’s broad rally in commodities, Jul09 sugar moved down slightly on Friday; the follow through from this is keeping trading around 15.3 in early trading on Monday. The BR real is now at the highest levels it has seen in over six months, so traders should be watching for directional moves in the spot rate for a indicator of the next move from current levels, as Brazilian producers will have the ability to dictate the sugar market over the next month. Even if oil retraces back to the mid to low $40s (see our Energy write-up) where $45 crude is a fraction of where it was this time last year, mid $40 crude is still in the rangebound pattern where it has resided over the last six months, and given the uncertainty in global economic output, it does not contain a strong indicator for the next sugar move. We still do not see long term support for July sugar at 15+ cent levels; in the short term we expect July to gravitate towards the 15 cent mark, with the next couple of weeks putting downward pressure and moving the contract to 14.5 – 14.8.

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