Brazilian Rains Soak Sugar Prices
Today’s Spotlight Market
Sugar traders may want to keep an eye peeled on a price chart of the Brazilian real, as continued weakness in this currency could trigger increased supplies of Sugar entering the world market. Brazilian Sugar producers have an incentive to sell Sugar as the real weakens, as producers receive foreign currency for their Sugar exports. The conversion of dollars, euros and pounds that are received, for example, can then be converted into increasing amounts of reals as the Brazilian currency falls in value vs. these major currencies. ?
Fundamentals
Sugar prices have been mired in a nearly 4-year bear market, as a global Sugar surplus continues to weigh on prices. The news continues to get worse for Sugar bulls looking to find a price bottom, with India announcing last week that it would begin to subsidize Sugar exports in an effort to help domestic Sugar mills increase sales and help to alleviate difficulties generating sufficient cash flow to pay cane producers. On top of the prospects of increased Indian exports in an already saturated market, weather forecasts are calling for much needed rainfall in the Sugar producing regions of Brazil, which is the global leader in Sugar Cane production. While the near-term outlook for Sugar prices remains negative, there are some signs that prices may find some support from the outlook for potentially lower production out of the European Union and India this coming season. The potential for improving margins for Ethanol production in Brazil could see increasing amounts of cane being used for fuel production, which could help to tighten Sugar supplies in the coming months.? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for May Sugar, we notice prices falling to a new contract low on Monday, on follow-through selling from the weak close the previous week. Some of the weakness seen in the May futures could stem from the rollover of the soon-to-expire March contract. The 14-day RSI is weak, with a current reading of 34.31. 14.00 looks to be the next support level for the May futures, with resistance found at the February 17th high of 15.19.?
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