How much longer will sugar futures continue in downtrend?

April 18, 2018 3:41PM CDT

This week’s comment finds the July sugar futures contract slicing into low priced territory we haven’t seen for years. Seven straight weeks of lower prices has the July contract trading an 11 handle with no real technical bottom in sight. I had to consult a weekly continuous chart to find a swing low, 10.50, for reference. With the Fund trader category almost as short as they have been for some time we can be excused as market watchers for thinking the sugar market is due for a bounce.  But this technical over-sold condition has not been enough counter the tremendous fundamental pressure from the abundance of sugar available. Trend-followers could be forced to cover short positions, but the market will have to close above 13.12 for that to happen in the July contract.  11.91, where the July contract is today, vs 13.12 feels far away but really only represents a little more than one full point.  It is possible that a short covering spark could light a fire in sugar, but the market will still have to contend with supply surplus.  It would make for a more interesting comment if we could find a fundamental crosscurrent to hang our hats on.  But, even with my imagination, I am at a loss to locate a significant fundamental change that could turn the sugar market toward bullish footing. This is usually the exact moment where the market will turn.  So, I am eagerly waiting to see what change is in the offing but at this moment the trend is down, really down. Those who have been early in attempting to locate a bottom have been punished. I continue to think options of shorter duration, if you must play from the long side, are the way to position for a bounce. Traders can get long exposure for less risk (though the risk of losing your premium purchased remains), than futures and if you are willing to pay up you can buy some time as well

Sugar Jul '18 Daily Chart

Sugar Jul '18 Daily Chart

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