Sugar Stocks Surplus Sinks Sweetener
Today’s Spotlight Market
Despite prices at multi-year lows, both large and small speculators continue to add to their net-short positions. According to the most recent Commitment of Traders report, non-commercial traders added an additional 2,763 new net-short positions during the reporting period ending August 25. This brings the large speculative net-short position to 15,547 contracts. Non-reportable traders added 26 contracts to their overall net-short position, bringing their position to a net-short 1,363 contracts. Commercial traders are on the other side of the trade adding 2,790 new net-long positions to increase their overall net-long position to 16,911 contracts.? ?
Fundamentals
Bearish traders remain in firm control of the Sugar futures market this year as not even the prospects for a production deficit in the 2015-16 season is expected to shake the market out of its multi-year price slump. The International Sugar Organization (ISO) is expecting Sugar demand to exceed production this season by nearly 2.5 million metric tons, with production falling just over 1% from last year. While normally a production deficit would be considered a bullish factor for prices, the bearish overhand of global Sugar stocks totaling nearly 25 million metric tons, would more than make up for the production shortfall. In addition, the continued weakness in emerging market currencies, particularly the Brazilian real, should entice producers to continue to supply the market with Sugar even at current price levels as they will receive larger amounts of their own currency once conversion takes place from their sales in dollars and euros. For the 2016-17 season, the prospects are a bit brighter with the potential for a strong El Nino adding a potential risk factor for commodities production, as well as the increased demand for Ethanol in Brazil, with higher biofuel blending mandates making it more profitable for many Cane producers to use its production for fuel rather than for food.
Technical Notes? – View Today’s Chart
Looking at the daily chart for March Sugar, we notice the market attempting to form a base just above 11.50. Last Monday?s ?spike? lower was more of an anomaly due to the steep sell-off seen in the equity markets that morning. Prices are holding near the 20-day moving average and the 14-day RSI has recovered somewhat from oversold levels, with a current reading of 41.44. 12.08 looks to be the next resistance level for the March futures with support found at 11.28.????
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