Sweet!
Today’s Spotlight Market
Both large and small speculators are turning bullish on Sugar futures according to the most recent Commitment of Traders report. During the reporting period ending October 13th, non-commercial traders added nearly 32,000 new net-long positions, while non-reportable traders added just over 12,750 contracts. This brings the cumulative speculative net-long position to over 211,500 contracts. Commercial participants are on the other side of the trade, adding over 44,600 new net-short positions last week.? ?
Fundamentals
Today?s Xpresso title is probably conveying the sentiment of bullish Sugar futures traders of late, as prices have recovered sharply from 7-year lows. Among the catalysts cited by analysts for the rise in prices was a reduction in the estimate for Brazilian Sugar exports, increased demand from China, and concerns of lower global cane production due to the El Nino weather event. The USDA lowered its estimate for Brazilian Sugar exports to 23.75 million metric tons, while also reducing its estimate for Sugar output by 1 million metric tons. This will be the third successive season of lower production for the world?s largest Sugar producing nation. In addition, there are some quality concerns appearing in the newly harvested crop, as wetter than normal weather conditions during the harvest have taken a toll on crop conditions.
While the news is filled with stories regarding China?s slowing economic growth, the world?s most populous nation still has a growing sweet tooth, as Sugar imports rose to 656,000 tons in September, which is the highest amount in nearly 2 years. The current El Nino weather event has already made in impact in India, where weather forecasters attribute this weather event as the cause for lower than normal rainfall during the all-important monsoon season. We have seen some private forecasters calling for Indian Sugar production to be lower this coming season due to insufficient rainfall. While the supply and demand fundamentals for Sugar are starting to favor the bull camp, the wild card may come from the economic realm in the guise of the currency markets and, in particular, the value of the Brazilian currency, where any signs of a rebound in the beleaguered Real could encourage producers to hold back on sales, which could lead to tightening supplies in the New Year.? ?
Technical Notes? -? View Today’s Chart
Today we are going to take a look at the so called ?big picture? and look at the performance of Sugar futures using the weekly continuation chart going back to the early 1960?s. In the last 50 plus years, there have been 3 ?historic? bull markets in Sugar, with the most recent one peaking back in 2011, with Sugar trading over 36 cents per pound. The downtrend line drawn from the 2011 high has been breached to the upside the past few weeks, which may be a signal that the 4+ year bear market has ended. 15.25 is seen as the next chart resistance level for the lead month futures, with support found at 13.60.
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