The Debts of the Lenders: Indian Drought Extends Grip Over Bullish Sugar Prices

Sugar bulls continue to get juiced. As of Friday, the Commitment of Traders showed commercials had pumped their long positions into a 12 month highs. Sugar is already at 28 year highs - how much longer can it continue rising?

India Cuts Aug Rainfall Estimate; Drought Looms

India’s weather department late Monday sharply cut its rainfall
forecast for August to 10% below normal from an earlier estimate it would be 1% above average, fueling concerns about a nationwide drought.

The seasonal rains were 28% below the 50-year average in the June 1-Aug. 9 period, the weather department said. Scanty rains are threatening a recovery in Asia’s third-largest economy as 60% of the farmlands are rain-fed.

Finance Minister Pranab Mukherjee Tuesday said a drought was looming over at least 161 of the country’s 625 districts, but played down concerns, stating he was optimistic the economy would still grow at the earlier estimate of over 6% in the fiscal ending March 2010.

“There is no point in pressing the panic button. This country has the capability of handling a drought situation,” Mukherjee said.

However, the federal finance secretary, Ashok Chawla, said weak rains may push up prices later in the current fiscal.

The annual monsoon rainfall is crucial to summer-sown crops like rice, sugar cane, pulses and oilseeds. Plantings during the season are down by 20% to date, Mukherjee said.

India’s sugar production in the current marketing year ending Sept. 30 is expected to fall to about 15 million tons on lower
sowing, down from 26.3 million tons a year earlier. India, the world’s largest sugar consumer, turned a net importer of the
sweetener in the current marketing year.

Source: CME News for Tomorrow