How long will the sugar futures market continue to slide? The fundamental picture for sugar appears to be bearish for quite a while into the future even though the US is looking to expand its bio-fuel usage over the next 10+ years. Over the past year, sugar production has increased throughout the world causing the prices to fall since peaking out last May.

Earlier this week, the Russian Institute for Agricultural Market Studies stated that they expected a decline in sugar consumption of approximately .7 million tonnes from last year which is approximately 30% less than last year. At the same time, their sugar beet refining rate has increased 32%.

Dubai's largest sugar refinery increased production by 9% last year and another 55% this year. At the same time that we are seeing an increase in the refining production more countries are also making raw sugar supplies available on the market. India recently relaxed its ban on exporting sugar and now competes with Thailand for their export business.

This is relevant because India was an importer of sugar the past couple of years. According to Hightower, two key factors to watch that could effect the sugar market include the Brazilian weather situation and a major bullish shift in the energy markets.

From a technical standpoint, the sugar appears to be at a very critical level with low volatility and tight consolidation as the market is holding major support. Although the fundamentals continue to look bearish, I do not recommend selling unless the market breaks major support below 1060.

Recommendation: Work to buy 1 March Sugar for 1160 stop and work to sell 1 March Sugar at 1055 stop.

Support: 1066, 958; Resistance: 1097, 1160, 1251

Chart Copyright 2007 CQG, Inc.