This week’s comment finds sugar again carving out new lows for the move. The March ’20 contract has traded below 12.00 at the time of this writing and it is difficult to see what might halt the decline. Near- term supplies are ample, and talk of 2020 production deficits are falling on deaf ears so far. It doesn’t take much imagination to see sugar continuing to have trouble finding support. In recent years, sugar has found support at these levels and at this size of market participant position. The fund trader short position is record large and the funds have shown a propensity to cycle out of positions when they reach this level, moving the market to the upside.
Wire services and commentators continue to pitch next year’s deficit projections. If production declines do happen then higher prices will be in order. Until then, the market must contend with abundant upfront supply and a technical picture with no lower boundary. Trend follower stops are almost a full 100 points overheard. For March sugar, the 18-day moving average comes in at 12.23 and the 50-day at 12.70. Don’t expect the March sugar futures contract will require a real fundamental to turn and head for the moving averages. Positioning for a move to the 50-day moving average, 12.70 in the March contract, with shorter timeframe options could be a lower-risk way to play.