Sugar Prices Steady As China Buys
Today’s Spotlight Market
One potential wild card for the Sugar market this year is the formation of an El Nino weather event. This weather phenomenon is caused by a prolonged warming of water temperatures in the equatorial Pacific Ocean. In the past, particularly strong El Nino?s have generated weather patterns that tend to favor dry conditions over Australia as well as Southeast Asia all the way to India. This lack of moisture can affect crop production including Sugar cane production, by reducing yields. Brazil also tends to feel the effects of El Nino, with an increased probability of above normal temperatures in the prime agricultural regions of this key Sugar producing nation.
World raw Sugar futures prices rebounded from recent lows as larger than expected Chinese imports spurred buying interest. Lead-month July Sugar rallied from 2-week lows after Chinese government officials reported the country?s Sugar imports doubled last month from a year ago levels. China imported just over 411,000 metric tons of Sugar in March as the world?s most populous nation continues to stockpile certain commodities for state-owned reserves.?
While the Chinese purchases were viewed as supportive for prices in the near-term, the longer term trend appears to favor bearish traders as the Sugar cane harvest in Brazil is about to begin. Brazil?s agricultural bureau, Conab, estimated the 2014-15 cane harvest at 671.7 million metric tons. If true, this would be record output for the largest Sugar cane growing nation. The potential for record production is even more remarkable as an early season drought affected parts of the major cane growing regions. Weather forecasts calling for moderate to heavy rainfall in the Brazilian cane growing regions may force delays to the harvest, but unless showers continue for an extended period of time, it may be difficult for any price rally to be sustained as producer hedge selling could be substantial if prices move towards recent highs near 18.50.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July Sugar, we notice prices mired in a consolidation zone the past several weeks, which followed a nearly 3-cent per pound rally off of multi-year lows. Prices are currently? wedged? between the 20 and 200-day moving averages and the 14-day RSI is reading a very neutral 50.36. Chart support is found at the February 21st low of 16.93, with resistance found at the March 6th high of 18.57.
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