This week’s comment finds the March sugar futures contract back into the 12.00’s after 4 solid days of upside price action. In the last 20 days, sugar has traded from below 11.00, to above 12.00, back down below 11.00, and back up over 12.00.  The March sugar futures contract is acting like my kids when I give them sugary snacks.

Strength in the Brazilian Real and the potential for political change in Brazil, highlighted in today’s Hightower comment, are supportive to sugar. Not to mention, the continuing strength in the energy markets. Sugar market watchers have been issuing forecasts for less sugar production in countries that have been producing sugar hand over fist. At some point, lower prices should disincentivize production, but to this point we have not seen that. I am always mindful of being fully committed to my understanding of the fundamental landscape at major market turning points. I am suspicious of market forecasts for less sugar and cannot think of a fundamental change that will alter the supply/demand balance. So, that makes me extra vigilant of my fundamental bias and mindful of price action, I don’t want to be smarter than the chart.

It is very possible that the major sugar producing countries will produce less sugar this year. It is very possible that a new Brazilian president, as suggested by Hightower, will focus more on the production of ethanol than sugar. The market with a large speculative trader category, short position, and the possibility that the fundamentals are turning, should see profit taking and trimming of short positions causing the market to go higher. However, these fundamentals don’t win the day if supply does not decrease. I still want to be positioned for downside price action in the coming weeks, but fighting the tape here is not going to be profitable. I like put spreads that cover the next 2 months, but don’t want to rush into having them on just yet.

Sugar Mar ’19 Daily Chart

Sugar Mar '19 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."