Will Sugar Price Rally Sour?
Today’s Spotlight Market
Sugar futures are the only major product of the ?Softs? that saw a decline in the large speculative net-long position the past week. The most recent Commitment of Trader?s report shows non-commercial traders shed 1,300 net-long positions during the reporting period that ended April 19. This decline was more than offset by an increase in the net-long position by small speculators, who added 4,570 new-net long positions during the same time period. Commercials continue to take the other side of the speculative trade, adding an additional 3,269 new net-short positions last week.
Fundamentals
Sugar futures have rallied off recent lows the past several weeks on concerns that the market would return to a deficit this season. However, the rally may be facing some headwinds, as dry weather in Brazil, the world?s leading Sugar cane producer, has allowed producers to get a good start to the harvest for the 2016-17 season. Brazilian Sugar production soared by well over 200% year over year in April, as Sugar mills have taken advantage of the dry weather and more favorable prices for Sugar to ramp-up production. The Brazilian Sugarcane Industry Association known as Unica, has announced its initial production forecast for Center South Cane production. For the 2016-17 season, Unica expects production to total between 33.5 and 35.0 million metric tons. This is well above the 31.2 million metric tons produced in the 2015-16 season. While Brazil?s Sugar production appears on the upswing, production in India?s top producing region is expected to fall sharply, as extremely dry conditions could see production down over 30% this season. The wild card is whether India will be a net-Sugar importer this season, which if true, could see analysts revising their estimates for any global Sugar supply deficits this year.???? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July Sugar, we notice prices beginning to consolidate just below the recent highs made back in March. The market is still generally in a bullish trend, as prices remain above both the 20- and 200-day moving averages. The 14-day RSI has begun to level-off from much stronger momentum readings the past several sessions and is now reading a more neutral 55.94. Chart support is seen at the April 20 low of 15.01, with resistance found at the April highs at 16.09.
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