Time to Sweeten on Sugar

The sugar futures market has been in a slow motion slide for nearly two years. This follows the market axiom that nothing beats low price like low prices and the expected surplus this year further adds to those concerns. That being said, the sugar market is trading at prices not seen since July of 2010. Furthermore, the sugar market’s seasonality should coincide with commercial long hedgers taking advantage of these multi-year low prices. Finally, the sugar market’s inherent volatility tends to reward forward thinking traders as this market can quickly leave its participants playing catch up.

Beginning with Moore Research’s seasonal analysis of the July sugar futures, you can see that the market typically bottoms near this time of year. Seasonal trends don’t always start right on time. Independent research shows that the combination of commercial trader action combined with the proper seasonal widow is typically more effective than either analysis method on its own.

We are nearing the typical bottoming period in the July sugar futures.
We are nearing the typical bottoming period in the July sugar futures.

When we combine their seasonal analysis with our normal Commitment of Traders (COT) analysis, we get this.

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Nearby sugar prices may be nearing a bottom as commercial long hedgers purchase forward inputs at multi-year lows.
Nearby sugar prices may be nearing a bottom as commercial long hedgers purchase forward inputs at multi-year lows.

Notice in particular, the green shaded box. Based on recent commercial trader action and the forward seasonal forecast, we believe July sugar prices will bottom out near here before rallying back towards the .14-.15cents per pound area. Finally, this may be what the market needs to begin showing some signs of a structural low.

 


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