Sugar Looking Sweeter? Open Interest is Up. Price is Down.

June 14, 2017 3:23PM CDT

This week’s comment finds the October sugar futures contract making new lows for the move. Technically, the October contract has support near 13.00 and then again near 12.00. The selling trend of the fund trader continues and on the other side of the ledger the commercial trader is increasing their long position. How much shorter/longer each category can get remains to be seen. There have been periods where price continued to erode while the positions of the larger traders simply oscillated back and forth. Fundamentally more sugar is coming down the pipe.  Brazil does a great job of producing sugar and exporting it, this we know. The stabilization of the Chinese economy can be viewed as ultimately friendly toward the price of sugar but the Chinese continue to work off their corn surplus by exporting corn based sweetener to their regional trading partners which is markedly bearish. If you can put the fact that sugar futures have traded lower almost every week since February out of your mind, there could be an opportunity for aggressive traders to own put spreads in anticipation of a move to 11.00. Many traders, uncomfortable being profitable on the short side, might ‘feel’ that sugar has traded low enough and could be entering an area of support once harvest is complete in Brazil. I understand the argument and agree, but it is premature to call for a bottom in sugar until it at least stops posting new lows every week.

 

Oct '17 Sugar Daily Chart

Oct '17 Sugar Daily Chart

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