RJO FuturesCast

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

Posted 06/14/2017 3:23PM CT | Joe Nikruto

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

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."