Bulls Sour on Sugar Prices
?? Fundamentals
Sugar prices continue to slump, falling to lows not seen since late 2010, as ample Brazilian supplies and better output from India have kept rallies in check. Brazil’s Sugar production is expected to total 2.5 million tons, which is nearly 1 million tons larger than last year’s total. Much improved harvest weather in September and October and a large cane crush is helping to keep supplies ample. On Thursday, Brazilian Sugar trade group UNICA reported that Center-South Sugar production rose by 73% in October vs. last year’s output. Weaker Ethanol demand has allowed more Sugar Cane to be processed for food, which also a factor weighing on prices.
World Sugar production should meet last year’s record levels once again, and with consumption stagnant in industrial countries, we will need to see a sharp increase in demand from developing nations next year to help whittle away at the global Sugar surplus, which is expected to last into the 2013/2014 season.The Commitment of Traders report shows large non-commercial traders shedding over 14,000 contracts from their net-long positions the week ending October 30th; leaving their net-long position at 56,238 contracts. This also leaves room for further long liquidation selling, as prices move lower.
?? Technical Notes
Looking at the daily chart for March Sugar, we notice psychological support at 19.00 failed to hold, which sent prices as low as 18.66 before some profit-taking buying by weak shorts emerged sending prices higher to end the week.
The 14-day RSI is weak with a current reading of 36.55. One bright spot, for those bargain hunter buyers, is a bullish divergence forming in the 14-day RSI, which may signal a short-covering rally is overdue. 18.50 is seen as the next support level for March Sugar, with resistance found at the November 6th highs of 19.77.
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