Good Afternoon,

Prices rallied from 28.20 to 28.97 today in spite of the stronger US dollar. The rally was led by buying in the May, rising 68 to 27.56 while March just 54 higher at 28.95. On the rally the front three contracts made new contacts highs but the backs behaved disappointingly due to producer selling and a lack of buying interest. Once the buying was completed March eased back to 27.97 with May declining to 26.69.  Eventually March rallied to 28.38, but eased to 28.91, 50 lower, just following settlement and last at 28.04. The early buying concentrated in the May helped the March/May to trade from 156 to 127 and last at 128 points and the May/July traded out from 264 to 323 and last at 268 after trading to 262 points.

The CRB is 250 lower having been almost 400 lower with the dollar index over 500 points higher.

The Brazilian line-up declined by 71,441 tonnes to 791,245 tonnes as the crop winds down. The line-up included new nominations of 69,129 tonnes to India and 26,362 tonnes to Spain.  The Brazilian Agriculture Minister will hold a meeting on Monday to discuss reducing the ethanol mix in gasoline from 25% due to the recent strong rally in ethanol prices, because of the poor tail of the center south crop due to the wet weather. They have the option of reducing the mixture to as low as 20%. The initial sentiment is that a reduction will not reduce ethanol prices to any great extent as lowering the mix would be anhydrous ethanol while the main fuel for the flex-fuel fleet is hydrous ethanol. The Ministry needs to convince millers to produce more ethanol as against sugar production which they are unlikely to do given the current large premium of sugar prices.

TCSC in Thailand will tender on January 14^th to sell a total of 254,499 tonnes of “B” quota sugar. They will be selling the 47,833 tonnes balance of the 2009/10 crop for July/September 2010 shipment, made up of 24,181 tonnes of j-spec and 23,652 tonnes of hi-pol, the balance of 97,333 tonnes of 2010/2011 crop for March/May 2011 shipment made up of 67,333 tonnes j-spec and 30,000 tonnes of hi-pol and the balance of 109,333 tonnes of the May/July 2011 shipment made up of 79,333 tonnes j-spec and 30,000 tonnes of hi-pol.  Thai sugar output from the current crop has reached 1.05 million tonnes, 40% higher than last year at this time, made up of 1.05 million tonnes of raws and 461,780 tonnes of whites.  They have crushed 41% more cane at 17.33 million tonnes as the yield has declined from 88.712 kilos per tonne of cane to 87.94 kilos. Thai new crop exports are starting to move with white sugar exports to Indonesia and China. Thai millers continue to look to buy back sales, especially raw sugar sales, to convert the sugar to whites to sell to Indonesia or India.

Indian domestic prices rallied 2.5% today to 3,972 rupees per tonnes, a further new record high. 

A representative of Maharashtra millers said they the refiners would now concentrate on white sugar imports with 500,000 tonnes of white imports expected to arrive in the first quarter. He added that Indian millers had contracted to buy 5.5 million tonnes of sugar to cover their deficit of which 3.8 million tonnes is raw sugar and the balance white sugar.

The Indonesian Government has issued a total of 1.06 million tonnes of raw sugar import permits spread between eight companies, with the sugar to arrive by June. This is part of a planned 2.21 million tonne import quota for 2010.

Regards

Douglas