Global Sugar Deficit Expected To Increase In 2016
Today’s Spotlight Market
Both large and small speculators have been on a Sugar buying binge the past week according to the most recent Commitment of Traders report. For the reporting period ending March 22, non-commercial and non-reportable traders added a combined 60,759 new net-long positions. This took the combined speculative net-long position to 263,482 contracts. Commercial traders are on the other side of the trade and have increased their net-short position to 263,482.
Fundamentals
After 5 years of falling prices due to a global surplus, the Sugar futures market appears to have broken out of its bear market slump, as growing demand and potential crop issues in Asia have sent prices soaring this quarter. Dry conditions in the Sugar Cane growing regions of India, Thailand and Brazil have commodity analysts revising their production estimates lower for the 2015-16 season. Sugar production in India is expected to fall by about 10% from last season?s totals, as monsoon rains were disappointing. El Nino is thought to be responsible for dry conditions over Southeast Asia, which could lead to lower Cane production in that region. Current forecasts are for a global Sugar deficit of between 6.6 and 7.8 million metric tons for the 2015-16 season, which should help to keep prices above the lows seen in February. However, with speculative long positions increasing sharply the past few weeks, a market correction would not be surprising to help shake weak longs out of the market, prior to another test of recent highs. Looking towards the 2016-17 season, all eyes will be on Brazil, the world?s leading Sugar exporting nation. Here traders will focus on the effects of Cane production going towards ethanol production, as well as the direction of the Brazilian currency — two factors outside of Mother Nature?s control that may have an outsized influence on Sugar prices later this year.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for May Sugar, we notice that what appeared to be a rounded top formation ended in a so called ?bear trap,? as prices failed to hold below chart support at 12.75, which cumulated in a sharp price rally on February 23.? Prices are now well above both the 20- and 200-day moving averages (MA), and the 14-day RSI has fallen below overbought levels, with a current reading of 62.27. The March 17 low of 15.47 looks to be near-term support for the May futures, with resistance found at the March 23 high of 16.75.
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