Sugar took out the December lows, which now leaves a downside technical objective for March sugar down at 12.68. Sugar’s bearish supply outlook continues to be a driving force and a center issue this year as prices have lost over 11% in value over the past eight sessions according to the Hightower Group. Furthermore, March sugar dropped to a new 6 and 1/2 month low, and with weak crude oil and a pullback in the Brazilian currency, we see even more sources of pressure for this market. However, of all these bearish factors, it was Brazil’s Ag Minister who suggested removing their 20% duty on imported ethanol (which mainly comes from the US) in exchange for the US lifting their ban on beef from Brazil that really triggered Sugar’s move downward today. Increased competition from imports could give Center-South mills second thoughts on emphasizing ethanol production over sugar production. Traders should keep in mind, however, that the RSI reading for March sugar is under 30 – signaling approaching oversold levels.
Sugar Mar ’18 Daily Chart with RSI