Traders Remain Bitter on Sugar Price Outlook

Today’s Spotlight Market
The current global surplus in Sugar is affecting calendar spreads in the futures market, as the front month to second month contango has widened to levels not seen since 2008. It appears that producers are having to pay higher prices to obtain storage for the 2013-14 harvest, as warehouses are filled with old-crop Sugar that still needs to be sold. Producers have been reluctant to sell Sugar from inventory due to current low prices, however with global demand remaining weak, we may see the contango widen even further to draw out marginal buyers willing to purchase Sugar for near-term delivery due to the current price discount vs. 2015 futures prices.?? ?

 

Fundamentals
Sugar futures prices remain depressed, as the nearly 4-year bear market shows no signs of ending. Weak global demand continues to weigh on prices, as the global market saw its 4th consecutive year of surplus. A slow start to the Indian monsoon season this year gave some bullish traders a reason for optimism, but recent rainfall appears to be ample to keep production on pace to meet expectations. India also raised their import duty to 25% from 15%, which is also seen as a negative factor for global Sugar prices. While some traders are showing concerns that Brazil?s cane harvest may end early due to the severe drought experienced this season, other producers, most notably Thailand, are expected to see larger crops this year. Although it appears that the 2014-15 season will not see production totals meet consumption demand, the current Sugar surplus should prove more than ample to meet demand and keep any price rallies in check going into 2015.

 

Technical Notes? -? View Today’s Chart
Looking at the daily chart for March Sugar, we notice the recent downtrend that started back in late June continues unabated, with prices remaining below both the 20- and 200-day moving averages (MA).? A moderate short-covering rally last week failed to reach resistance at the 20-day MA before a sharp sell-off to end the week. The 14-day RSI remains weak, with a current reading of 39.53. The recent low of 17.29 remains support for the March futures, with resistance found at 18.02.

WednesdayAG27

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