The market seems poised for a resumption of the uptrend after holding key support this week and turning higher with other commodity markets yesterday. India seems to be in a position to see increased buying over the near-term as sugar prices are up 17% in the past three weeks during a period where world prices drifted lower. Traders see the need to import near 1-2 million tonnes for delivery after March when the crushing season is over. Producers in India are threatening to stop selling sugar to mills unless they are paid more. If not resolved, this could obviously lead to further tightness this year but even more threatening would be to see declining planted area for next year. In Utter Pradesh, producers receive near 170 rupees but want at least 280. March sugar pushed sharply higher on the session yesterday as a combination of good news for the economy, good news for fund traders who want to buy more commodities and ideas that the sugar market has reached a level that may stimulate more export demand helped to support. Economic news in the US was strong enough to spark expectations that the global economy, and demand will continue to expand and recovery from recessionary levels of earlier this year. Talk of India buying more sugar on the world market and ideas that the US and Mexico will also be needing more imports this season added to the positive tone. A US food and beverage trade group is urging the USDA to expand import quotas by an additional 850,000-1.0 million short tonnes this year. Indonesia and Bangladesh may also be in the market for sugar soon. While there are many traders who believe the highs are in place, the world stocks/usage is extremely tight and some trade houses are comparing the tightness to the mid-1970's and the early 1980's when prices topped near 66 cents and near 45 cents respectively.

The turn higher from support and the outlook for more demand may provide enough support for another leg up in sugar prices. Fundamentals look bullish into early 2010 and the market has corrected the overbought condition.

Consider buying March sugar near 22.34 with 24.30 and then 25.79 as next good resistance.

Buy the March sugar 22.50 put at 230 and then buy March sugar futures at the market. After in, enter order to sell the March sugar 25.00 call at 172.