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The market inched higher in overnight trade pushing to a new 29-year high before pulling back to trade lower late in the overnight session. The market appears to be well supported by speculators on minor set-backs. Talk of disease issues in Brazil and a tighter than expected market in China helped to provide underlying support. A local government official in China’s largest producing region (Guangxi) suggested that production could slip about 700,000 tonnes from last year due to drought-type conditions since August. Traders expected a drop of near 350,000 tonnes from the region so the talk was seen as positive. China has already released near 860,000 tonnes of sugar from state reserves as a way to ease prices but traders suspect a production deficit of near 2 million tonnes or more from China this season. March sugar closed 90 higher on the session Friday and closed up 112 points for the week last week. The market pushed to a new 29 year high at 3033 before pulling back to close back under 30.00. Extreme tightness in the cash market and indications that cash buyers are a bit more active helped support the aggressive buying. Ideas that the market is overbought helped spark the sell-off early in the week but buyers were active Friday despite bearish outside market forces, a strong US dollar and another break in energy prices. The Commitments-of Traders reports for the week ending January 26th showed a light selling trend from speculators who reduced their net long position by 5,619 contracts to 230,453. Index funds reduced their net long position by 4,257 contracts to a net long of 139,538 while non-reportable traders (small specs) reduced their net long position by 5,562 contracts to 41,132. The selling trend is a short-term negative force and the hefty net long position of the speculator leaves the market in an overbought status but still not at an extreme. Traders remain concerned with the possibility of tightening credit in China and a slowdown in the recovery. Traders are lightly concerned with potential losses in Brazil sugar production due to the spread of orange rust fungus. The fungus spread to two more regions in Brazil. Traders do not see major losses from the fungus and 70% of the cane is already resistant to the disease. With about 15% of the cane crop re-planted each year, resistance varieties will soon be fully used.
TODAY’S GUIDANCE: Weakness in London and a threat of a reversal today if the market closes lower may keep new buyers away. However, commercial buyers are likely to be active on corrections.
Sugar Market Commentary – 2010.02.01
by Terry Roggensack on February 1, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The market inched higher in overnight trade pushing to a new 29-year high before pulling back to trade lower late in the overnight session. The market appears to be well supported by speculators on minor set-backs. Talk of disease issues in Brazil and a tighter than expected market in China helped to provide underlying support. A local government official in China’s largest producing region (Guangxi) suggested that production could slip about 700,000 tonnes from last year due to drought-type conditions since August. Traders expected a drop of near 350,000 tonnes from the region so the talk was seen as positive. China has already released near 860,000 tonnes of sugar from state reserves as a way to ease prices but traders suspect a production deficit of near 2 million tonnes or more from China this season. March sugar closed 90 higher on the session Friday and closed up 112 points for the week last week. The market pushed to a new 29 year high at 3033 before pulling back to close back under 30.00. Extreme tightness in the cash market and indications that cash buyers are a bit more active helped support the aggressive buying. Ideas that the market is overbought helped spark the sell-off early in the week but buyers were active Friday despite bearish outside market forces, a strong US dollar and another break in energy prices. The Commitments-of Traders reports for the week ending January 26th showed a light selling trend from speculators who reduced their net long position by 5,619 contracts to 230,453. Index funds reduced their net long position by 4,257 contracts to a net long of 139,538 while non-reportable traders (small specs) reduced their net long position by 5,562 contracts to 41,132. The selling trend is a short-term negative force and the hefty net long position of the speculator leaves the market in an overbought status but still not at an extreme. Traders remain concerned with the possibility of tightening credit in China and a slowdown in the recovery. Traders are lightly concerned with potential losses in Brazil sugar production due to the spread of orange rust fungus. The fungus spread to two more regions in Brazil. Traders do not see major losses from the fungus and 70% of the cane is already resistant to the disease. With about 15% of the cane crop re-planted each year, resistance varieties will soon be fully used.
TODAY’S GUIDANCE: Weakness in London and a threat of a reversal today if the market closes lower may keep new buyers away. However, commercial buyers are likely to be active on corrections.
Tags: Softs, Sugar
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