Will Bullish Traders Finally Sweeten on Sugar?
Today’s Spotlight Market
Both large and small speculative accounts have been aggressively covering short-positions in Sugar futures lately, with the Commitment of Traders report showing non-commercial and non-reportable traders reducing their net-short position by over 25,000 contracts the week ending February 4th. This was the main catalysts behind the over 1.50-point rally in prices during the week. Although prices are now off recent highs seen late last week, we are still seeing some short-covering buying emerge, as traders fear being caught short should weather forecasts in Brazil continue to call for hot, dry weather.?? ?
Fundamentals
After trading near 3 ?-year lows, front month Sugar futures are trying to find a bottom, as dry weather conditions in the growing regions of Brazil have traders reconsidering holding short positions. Analysts are starting to revise their projections downward for the 2014/15 Brazilian Sugar Cane crop, originally estimated near 600 million metric tons, due to dry conditions which may hurt yields later this year. Although some weather forecasts are calling for improving conditions in the coming weeks, it may be too late to assure another bumper crop this season. There has even been some talk by private forecasters that the global Sugar market may actually be in deficit this coming year, as the 3-plus years of surplus have been drawn down due to increased demand at current low prices and potential production issues, although the general consensus is for a moderate 1 to 1.5 million ton surplus. Traders will be keen on following government policies out of India, which is the world?s second largest Sugar producer. Earlier this week, the Indian government announced a plan to offer financial incentives to Sugar millers to encourage raw Sugar exports, as domestic prices have fallen below the cost of production. This announcement may help to cap any major rally attempts in the near-term, as the market attempts to absorb increased supplies in the coming weeks. ?
—————————————————————————————————
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.