The decline in the open interest indicated that Friday’s recovery was unlikely new buying.  Prices rallied from 22.81, unchanged, to eventually trade up to 23.59, 78 higher, about the time the options opened. The trade, specs and locals all bought as the dollar weakened and spec stops were activated as the market broke through the 20-day at 23.01, the 10-day at 23.03, the 40-day at 23.32 and the 50-day at 23.53, in good volume. The trade and producers capped the rally and March eased back late on to 23.10 before rallying back to 23.50 and last at 23.35. The volume tailed off later in the session. The March/May widened from 99 to 113, with the widest level not trading when the flat price was at its highest, and last at 109 points.

Farmers in the Indian state of Uttar Pradesh have set fire to sugar on a train carrying Brazilian raw sugar but the quantity damaged may have been small and the train, which had already delivered part of its load, was turned back. This is all part of the protests by the farmers who continue to demand the millers pay a higher price for their sugar cane. They are also threatening to burn their own cane if they do not get the 280 rupees per 100 kilos demanded - This unrest between the farmers and the millers is likely to discourage farmers switching back to sugar for the 2010/11 crop. Bear in mind that although the Indian domestic cane price has about doubled over last year, which the farmer looks at, the return to the millers has not doubled as about one third of the millers outturn is based on world sugar priced imports. The Indian farm Ministry is likely to issue their first estimates of 2009/10 crop this week. The early talk is that sugar production in Uttar Pradesh could be 10 percent lower due to the summer drought.

Industry Officials in China see the current sugar crop being below 12 million tonnes compared with 12.43 million tonnes in 2008/09. They see acreage down 8%, with beet acreage down 50 percent, and the dry weather has affected the crop. They see sugar production in Guangxi, the biggest producing province unchanged at 7.63 million but Yunnan production is expected 185,000 tonnes lower at 2.05 million tonnes while Guangdong is expected to produce 60,000 tonnes less at one million tonnes. They see that the production deficit will be made up from releases from state reserves and committed imports from Cuba.

A spokesman for the Cosan has forecast Brazilian exports of ethanol this year below three billion liters, compared with 4.5 billion last year. The reasons for this are the strong real, the wet weather and the millers concentrating on sugar production to the detriment of ethanol due to the higher return from sugar. He sees their domestic ethanol market being tight into 2010 due to demand from the flex-fuel car fleet. On the other hand a Brazilian analyst said this demand may be capped by ethanol prices moving higher than 70 percent of the gasoline price, as this tends to be the threshold of whether drivers use ethanol or gasoline due to the poorer performance from ethanol. Rain is due to return to the center south of Brazil on Wednesday.

Zambia Sugar, the biggest local producers has cut their production forecast by 70,000 tonnes to 350,000 tonnes due to excessive rains.