Good Afternoon,

The open interest showed the main action was specs rolling March longs to May.

March rallied early today to 27.12, five higher, in light volume. The rally could not be sustained and prices eased back 66 points to 24.41, encouraged by the stronger dollar and the earlier easing of the March/May spread, where the index funds continue to roll March longs forward. Trade buying held the  lows and prices bounced back strongly but did not hold all of the rally due to further pressure on the March/May, which traded down to 68 very late in the session from an early trade at 91. The last traded on the spread was at 72 points and the last trade on March was at 26.76 after settling at 26.64.

Unica reported in the last two weeks of January the center south crushed 2.58 million tonnes of cane to bring the total crush to 529.6 million tonnes, 5.7% higher than last year’s. They produced 43,900 tonnes of sugar in the period to bring the total sugar production to 28.42 million tonnes, 6.2% ahead of last year’s. Ethanol production is 23 billion liters, which is 7.4% lower than last year.  91 of the total of 350 mills are still operating in spite of the seasonal wet weather. 

TCSB in Thailand lowered their forecast of the current sugar crop by 7.9% to 6.62 million tonnes. The reason is the low yields, which are currently 94.76 kg/tonne compared with 108 kg/tonne last year. Total sugar production so far is 3.62 million tonnes.

The Indian state of Andhra Pradesh is considering looking to import sugar to improve availability. A newspaper is reporting that a government official is thinking of proposing that state companies import one million tonnes of white sugar to subsidize sales of sugar to the poor. Last April the government said state companies could import one million tonnes of white sugar - at that time the idea was that the state companies could only pay economic price to make a profit, while the official comment seems to indicate that the state companies would sell these imports, if they decide to import, at lower prices to the poor. Indian domestic prices declined 3.36% today as the harvest is in full swing.  These prices are at the lowest level since January 15th. In Uttar Pradesh 28 of the 128 mills have finished crushing due to the small cane crop and the total crop may finish by mid-February. The mills are only crushing 452,000 tonnes of cane per day compared with their capacity of 772,000 tonnes. These figures would indicate they had excess capacity to refine the 900,000 or more tonnes that they contracted to import but the state banned the import.  The state hopes to produce 4.2 million tonnes of sugar this year against 4.6 million last year and production, so far is 3.5 million tonnes.

The Philippines will auction the import rights for 60,000 tonnes of refined sugar on February 23rd with the sugar to arrive by May 15th. This tender is part of their plans to import 150,000 tonnes.  

The head of the German beet industry said they may reduce their sugar beet acreage by 5 to 6 percent as they produced 4.6 million tonnes of sugar this year, which is 1.51 million tonnes over the EU sugar production quota. This over-quota sugar production should be sold for non-sweetener usage but some may be exported under the EU plans to export 500,000 tonnes over their WTO export quota.

 Regards,

Douglas