Sugar Bulls Cry ?Wait ?Till Next Year!?
Today’s Spotlight Market
Weather predictions calling for a potentially strong ?El Nino? weather event this year could spell trouble for the Sugar Cane crop in India this year, as forecasters are expecting this season?s monsoon rainfall to come in below average. India depends on the monsoon rains for its crop production as nearly 70% of its rail fall occurs from June to September. The India Meteorological Department has already cut its rail fall forecast to only 88% of normal from 93% of normal earlier this year.?? ?
Fundamentals
Bearish traders have had the upper hand in the Sugar futures market since 2011 when a major supply deficiency sent prices above 35-cents per pound for the first time since 1980. Well, the old saying that the ?cure for high prices is high prices? certainly was evident in the Sugar market as global producers ramped up production which sent the market from a large deficit to a huge surplus in only a few seasons, which sent prices to its current level of just over 12 cents per pound in mid-2015.
The outlook for Sugar prices for the rest of 2015 does not look bright for Sugar bulls, as the market remains awash with some private forecasters calling for a nearly 3 million metric ton surplus for the 2014-15 season.However, the outlook for the 2015-16 season could be interesting, especially with the potential for a strong El Nino weather event which could greatly affect the weather outlook for the major Sugar producing regions.
In addition, global demand for Sugar is expected to improve in the coming year, especially if we see an improvement in the world economy and especially in emerging markets where a growing ?middle class? should spur demand for commodities in general and especially a commodity like Sugar, which is can be viewed as a ?luxury? item for many in emerging nations.?? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July Sugar, we notice the market continuing to grind lower as recent attempts to form a bottom have failed. Prices have been holding below the 20-day moving average the past 2 weeks and it would take a close above this widely watched technical indicator to change the short-term momentum from bearish to bullish. The 14-day RSI is moving towards a more neutral level with a current reading of 42.42. The low of 11.83 made back on May 27 remains as the next major support level for the July contract with resistance seen at the June 2 high of 12.50.
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