The global sugar prices have fallen off a cliff literally in the last few weeks and if you see the five-year chart for sugar prices they have been in a band between US $300 and $400 for much of the time in last five years.
In 2006 the prices did go as high as US $500 but they came back by the end of the year and the prices were in a range throughout the duration of 2007, 2008 and early 2009, and then the tremendous price rally happened in sugar prices where prices went as high as US $720-725 which was almost double the starting price in the year in 2009.
So that was a major rally in sugar that we saw and what we have seen within the first three months of 2010, from January to end of March, is a severe correction in the prices.
Prices are now back below US $500.00 at around US $480-490.00 and based on the chart it appears that the correction is not complete yet and that we could see the sugar prices go even below US $400.00 looking at the five-year charts and also the three-year and one-year charts.
So in that sense we think that it is better to be very cautious in the sugar stocks and sugar futures currently and the position would either be a short position still, or best would be to remain in the cash and not take any call till a stable pattern appears which could take another few weeks from now and once the price stabilizes at a certain level then that is the price at which we should enter the sugar futures or sugar stocks.
At this point looking at the chart it doesn’t give any confidence that the prices are stabilizing. The selloff has been very intense looking at the chart and the volumes have been very high in the selloff and therefore we think that right price probably to enter the sugar stocks and sugar futures for a buying or a call will be around US $400 which is still a good 20% down from where we are currently.