DJ ICE Sugar Review: Retreats With CRB; Index Funds Sell

DOW JONES NEWSWIRES
World raw sugar prices sank to 1 1/2-week lows Monday on ICE Futures U.S. as a stronger dollar weighed on crude oil and other commodities and because index funds sold ICE in late action.

The March contract finished down 58 points at 11.47 cents a pound, with May losing 53 points to 11.97. July slid 45 points to 12.39 cents.
"March broke the early-2009 low at 11.60 cents and pushed into sell stops," a New York desk trader said. "Soybeans and crude oil fell out of their bunk beds. The March contract breached 11.50 cents and May slid below 12 cents."
The firmer dollar leaned on the CRB Index but the dollar later relinquished some of its early gains, he noted.

A New York desk manager said index funds sold ICE sugar Monday, particularly before the close, and should sell every day into late this week in their portfolio reshuffling.
The desk trader said the ICE market, however, is underpinned by tightening global supplies this season, and added "I expect we'll turn around at some point this week."

Sugar accounts for 2.993% of the 19-component Dow Jones-AIG Commodity Index in 2009, down from 3.185% in 2008.
A total of 8,736 March-May switches traded by 1:30 p.m. EST. The March-May spread worked at 43-52 points, settling at 50 points. Traders said 2,072 exchanges of futures for physicals were done in March by 1:30 p.m. EST. No exchanges of futures for swaps had been done at that time.

ICE electronic futures volume at 1:30 p.m. EST was 73,131 lots. In options, 6,435 calls and 8,349 puts traded, the exchange said.

In a 2009 outlook, Boyd Cruel, analyst with Alaron, said that "if equity markets improve and the dollar moves lower, we could see sugar prices retest the 2008 high of around 15 cents a pound." Otherwise, "sugar will have difficulty getting over 13 cents."

Thailand produced 1.59 million tons of sugar from Nov. 26, when crushing started, to Jan. 8, and that was down 3% on the year, the Cane and Sugar Board said Monday. The nation's crushing runs to April, when output for the season could also be down 3%. Asia's major producers, including Thailand, India, China and the Philippines, all expect declines in output this year. The International Sugar Organization forecasts a global production deficit of 3.6 million tons in the year ending Sept. 30.
A truckers' strike in India ended after disrupting sugar movement for five days, industry members there said.

Brazil's center-south harvest should provide a bumper 498 million tons of cane in 2008-09, while the northeast region produces 66 million tons, consultants Datagro said Monday. Sugar output should total 26.6 million tons in the center-south and 4.8 million tons in the northeast. Ethanol production, meanwhile, should reach 24.6 million tons in the center-south and 2.3 million tons in the northeast, Datagro said.

Brazilian economists expect the nation's GDP growth to slow in 2009 to 2%. Brazil's third-quarter 2008 GDP expanded 6.8% versus 6.1% in the second quarter, with the fourth-quarter rate awaited.

USDA on Monday raised U.S. 2008-09 cane production and hiked ending stocks, putting the stocks-to-use ratio at 9.9%--which is up from last month's projection but still very small. Last year's stocks-to-use ratio was also modest at 15.2%. USDA may have to expand the import quota this season to make more sugar available, traders said.
Funds and small speculators combined were net long 87,983 lots of ICE world sugar futures and options on Jan. 6, versus 49,606 lots the week before after covering shorts and adding to longs, Friday's commitments of traders report showed. Commercials stood net short 87,983 lots, the CFTC said. Index traders - mainly institutions with commodity index-related positions - were net long 222,609 lots on Jan. 6 against 221,002 the week before.

ICE March finds support at 11.45-11.44, 11.43, 11.40, 11.39, 11.37 and 11.35 cents, with resistance at 12.11-12.12, 12.15, 12.17, 12.20-12.21 and 12.23 cents.