Sugar Heats Up On Brazilian Drought
Today’s Spotlight Market? -? Sugar prices have rebounded over the past five trading sessions after prices broke the 15.00 mark on the downside.? Sugar prices have been in a vicious downtrend for two years, as global supplies continue to outpace demand.? Drought conditions in Brazil have threatened crop yields in the country.? Not only is this the hottest January on record for the nation, but Brazil has also seen the smallest rainfall over the same period in 20 years.? Brazil is the world?s largest producer and exporter of Sugar. ?
Fundamentals? -? In addition to the dryness in Brazil threatening crops, India has postponed plans to boost its exports.? Prior to the decision, traders were concerned that the world?s second largest producer was going to dump more supply on the global market, which would have exacerbated the supply glut.? At this point, India continues to defer subsidies to Sugar mills, which would have given mills incentives to export.? Funds have lightened up their short position on the news, but still hold a very substantial short position.? The large net fund short should act as support for prices in the near-term and has the potential to quickly drive prices higher.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Sugar contract forming a sharp reversal after spending a few days teetering near the 15.00 mark.? Yesterday?s price action suggests the reversal may be short lived, as the March contract formed a spinning top on the daily chart.? The market settled just above the 50-day moving average and could build momentum if prices manage to stay above the average.
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