Higher Sugar Prices May Be Seen But Not Until 2013?
??? Fundamentals
Sugar futures are trying to find a bottom, as some bargain hunters are establishing long positions after the lead month October futures briefly fell below 19 cents per pound last week. Some bullish traders point to the potential for lower production out of India this coming season, as the monsoon season has been a disappointment. We are already seeing estimates of lower cane production, with the Indian Sugar Mills Association lowering their forecast for the 2012-13 season by 1 million metric tons to 24 million metric tons. This is 2 million tons below last season’s production totals and may curtail Sugar exports from the world’s second largest Sugar producer behind Brazil next year. However, any major rally in prices may not be seen until 2013, as we are still in the midst of a global Sugar surplus. Russian Sugar Beet production has increased sharply this year and is expected to reduce the country’s Sugar import needs. Brazil is currently holding significant supplies of Sugar, and any significant rally attempts may be met with hedge selling form Brazilian Sugar producers. Drier weather in the world’s largest Sugar producing nation is seen as beneficial for cane production, which may also weigh on prices in the near-term. Many bullish traders may need to wait until 2013 before we see any meaningful rally in Sugar prices, or until the current global surplus starts to recede.
?? Technical Notes
Looking at the daily chart for March Sugar, we notice prices attempting to rebound from lows not seen since January 2011.
The 140-day RSI has rebounded from oversold levels, with a current reading of 39.32. Recent rally attempts have been stymied by the 20-day moving average, and some traders may wish to keep an eye on how prices react as we move closer to this widely watched technical indicator. Support for March Sugar is seen at the recent low of 19.48, with resistance seen at the 20-day moving average currently near the 20.42 price level.
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