This week’s comment finds March sugar futures continuing to push higher into territory not seen since mid-September. Energy market strength has translated into higher prices for March sugar futures. The rally appears to be fueled in large part by short covering with open interest shrinking along with the short position of the funds. 15.22 is the line in the sand this market must cross and hold for bulls to gain a level of comfort while funds continue to be pushed out of short positions and begin to establish new, technically signaled, long positions. A recent missive from a long standing, widely read ICE softs markets commentator saw her highlighting the ability of the sugar market to essentially shrug off the end of European production and export controls. The commentator, Judith Ganes, who has always been keenly tuned in to softs market fundamentals, mentioned that it may too soon to conclude the whole episode is baked into the sugar market cake. While I agree with her, the chart has gone from taking aim at new lows to setting up for another attempt at upside breakout. This is not the first time we have been here. Since June we have seen these breakout attempts run into resistance in the 15’s. Technically, the chart looks poised to make a move into the mid 15 area and beyond. Funds are still short and any move over 15.22 will see them getting less so and maybe even long. If commercial pricing at those levels does not show up the market will have to auction higher to find willing sellers. Fundamentally, I am not sure this market has the ingredients to add upside layers to the cake. The 18-day moving average comes in at 14.62 in the March contract. Stochastics are in overbought territory. March sugar has managed to close over the 50-day moving average, 14.45, for the last 8 trading sessions. Every day that this market manages to stay above that level is further evidence of a possible trend change in March sugar in spite of surplus numbers that say otherwise. 

 

Mar ’18 Sugar Daily Chart