Good Afternoon,

The open interest continued to indicate that specs added shorts.

Prices traded 19 points higher to 19.90 early in the session, but failed due to the stronger dollar and fell to 19.11. The last print in May was 19.12.  On spread, the May/July traded from 66 points (the lowest since July 2009) to 88, with the last print on the lows.

Dry weather conditions have forced TCSB to revise downward their estimate of the 2010-11 crop.  Current forecasts call for 71-72 million tonnes of cane, while earlier estimates totaled 80 million tonnes; initial estimates were 72 million tonnes.  Conditions have been so dry that the Mekong River has reached its lowest level in nearly 20 years.

Millers in India are lobbying for a 60% import duty on ready-to-eat white sugar as the zero duty is set to expire at the end of the year.  Millers have witnessed domestic prices drop to INR 30,000 per tonne from INR 40,000 as world prices have fallen and the Brazilian crop begins. Further, India is at its period of peak stocks and is wrapping up their domestic crop, and an additional four million tonnes of white sugar produced from imported raws is available.  Millers cite production costs of INR 35,000 per tonne.  I wonder whether if this will cause millers to get further behind on payment to farmers, discouraging new production.  Today the Indian domestic prices rallied 6.5% on the thought that the government may ease their pressure on domestic prices.

Regards,

Douglas