This week’s comment finds the October sugar futures contract carving out new lows for the move. In our last comment, we asked what fundamentals could emerge that might drive prices lower. The record production from India last year still must find a home as mentioned in this morning’s Hightower report. They suggested that India will subsidize exports and this is weighing on the market. Also mentioned was Mexico and new trade agreements with the U.S. The result of the new agreement being Mexico will have upwards of 500,000 tonnes of sugar that will also have to find a home as they will not be shipping it into the U.S. 

While the wire services have done a great job of bringing us new bearish fundamentals this week, today’s price action was more like sell the rumor buy the fact. After making new lows early in the session, sugar managed to close near yesterday’s high. This could be an early sign that bearish developments are now baked into our sugar cake. Overall, the trend is down. It has been my assertion, that as we moved further into the year and projections for deficits in production were met with ample supplies of sugar, up front price would continue to erode. The October contract remains just below the 18-day moving average, 11.54. Closes over the 18-day will likely signal the market is done going down for now and may need to consolidate in a range between 11.20 and 11.80.  It is still summer. The Fund trader is short over 150,000 contracts. This is not a record, and there is room for more selling by the Funds.  But, traders who are short should watch price action carefully to see if October stops reacting to bearish news.  This is the time of year where a short short-covering rally could travel a lot of distance with very little fundamental fuel.

Sugar Oct ’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."