Six-Year Lows Put Sugar Bulls In A Sour Mood
Today’s Spotlight Market
Despite Sugar?s move to 6-year lows, both large and small speculators appear to be trying to pick a bottom in this bear market, according to recent data. The most recent Commitment of Traders report shows non-commercial traders adding over 40,000 new net-long positions during the reporting period ending on July 14th. This increased the net-long position of large funds and traders to nearly 74,000 contracts. Even small speculators have reversed their overall position in Sugar from bearish to bullish by purchasing a net-long 13,000 contracts during the same period to take their overall position to a net-long 10,009 contracts. Commercials remain short Sugar, adding over 54,000 new net-short positions to increase their overall short position to nearly 84,000 contracts.
Fundamentals
Sugar futures could be the poster child for the overall malaise in the commodity markets this year, as the lead month October futures fell to over 6-year lows to start the week. The reasons behind Sugar?s weakness are numerous and include large global Sugar stockpiles, the potential for another record Sugar Cane harvest from Brazil, the world?s leading Cane producer, and a strengthening U.S. Dollar, which makes commodities priced in Dollars more expensive for non-Dollar buyers. While current low prices for Sugar are expected to lead to increased consumption for the 2015-16 marketing year, the current global surplus is expected to help cap any significant price gains, even if the market moves to a small supply deficit in the coming months. Expectations that Indonesia, the world?s second leading Sugar importer, will be buying less Sugar than initially expected this season is an additional factor for the bearish case of Sugar prices. Sugar bulls will note that the current low price for raw Sugar is making it more profitable to produce cane based Ethanol than Sugar used for human consumption, which could allow more Cane to be used for fuel rather than food in the coming months.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for October Sugar, we note a rare chart gap from Friday?s close to Monday?s opening. Monday?s trading volume was much higher than average, which helps to strengthen the bearish bias. The 14-day RSI remains week but is holding above oversold levels, with a current reading of 36.22. Looking back on the weekly continuation chart for Sugar, we do not see any significant chart support until the 10.50 price level, with resistance seen at 12.80.???
