This week’s comment finds the March sugar futures contract trading near steady after six straight sessions lower.  Sugar has dropped from 15.49 to 13.70 in one week but open interest is increasing.  The fundamental story, more supply/surplus, has come into focus again across the wires. Interestingly, soft commodities such as cocoa and coffee have seen a downdraft to new lows or near new lows. This could be year-end position squaring by large participants or just the realization that there is ample supplies of these soft commodities.  Either way, the reality we see on the chart shows the March sugar contract is now squarely in oversold technical territory.  A bounce to 14.50, the 50-day moving average comes in near 14.57, is certainly in the cards. Sugar has found support in the 13.50-13.70 area four times in 2017.  There are projections for surplus in 2018 and more balanced supply/demand in 2019 but sugar remains mired in a range between 13.50 and 15.50. Trend followers have been on the losing side of this lateral chop in sugar while traders willing to take counter trend positions at the top and bottom of the range likely have been rewarded. Look for sugar to bounce back to at least the middle of the range.  Aggressive traders could use February calls to position for a move back to the middle of the range at least. The Feb options do not expire until the middle of January and give traders four weeks to position for another whipsaw.

Sugar March ’18 Daily Chart


Joe Nikruto

Joe Nikruto attended Indiana State University and DePaul University in Chicago with a major concentration in economics. "It was during college that I got a job as a runner at the Chicago Board of Trade. I was immediately hooked," he says.He adds that he also enjoys futures trading because anyone can do it. "Your success depends on how you handle the risk and how much work you are willing to put in. You don't need a big-time Wall Street connection, or a degree from an Ivy League school to get started. Your success largely depends on you and what you put into it." In 1992, he started as a runner and back office clerk for a very large futures commission merchant (FCM). He moved up to pit clerk, then research associate working on the trading floors directly for a grain and livestock concern based in Memphis. He spent time on various trading desks for a large retail FCM and then became Series 3 registered in 1997. He also helped develop an online trading platform and consulted on development and trading of mechanical trading systems. He has always worked to assist his clients with all types of trading-from option strategies and hedging to complicated mechanical trading systems. His advisory background includes Floyd Upperman, McMaster, Walter Bressert, Ken Roberts, Tech Guru, Hightower, Helms and Barry Rosen. As for his involvement with RJO, Nikruto says, "R.J. O'Brien has been in operation for more than 100 years. That is a century of supporting customers. You have to be doing something right for folks who use futures to choose to do business with you for that long."