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Sugar Acts Like a Resumption of the Uptrend; 22.17 Next

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sugar-cane-595A major upside break-out lifted sugar more than 1.3 cents higher (up 6.8%) over Thursday and Friday and the market experienced strong gains overnight. For the week, October sugar finished with a gain of 1.30 cents. Friday’s strong close was especially impressive as it came with the Brazilian currency pulling back from its recent highs. Rains forecast for late this week in some of Brazil’s Center-South sugar-growing areas could slow down their harvesting and crushing progress that have been going at a strong pace over the past few months. After a slow start, India’s monsoon rainfall has climbed above average for this season. While there is daily precipitation in the forecast for most of their major growing regions through the middle of the week, the states of Maharashtra and Karnataka will only see scattered light rainfall over that timeframe.

Unless their precipitation can ramp up significantly during August and September, forecasts for their 2016/17 sugar production may be to be dialed down further from current estimates that are centering around 23.5 to 24 million tonnes, which in turn will make near-term Asian sugar supplies even tighter. The Commitments of Traders reports as of August 2nd showed Non-Commercial traders were net long 306,340 contracts, a decrease of 2,798 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 351,930 contracts, down 19,168 contracts for the week. Commodity Index traders held a net long position of 176,748 contracts, down 4,196 contracts for the week.

TODAY’S MARKET IDEAS: With a tight Asian supply situation, sugar prices should continue to hold onto upside momentum. Technically, the market has decisively climbed through trendline resistance while October sugar’s breakout move above 20.26 opens the door to a run up to 22.17. Near-term support for October sugar is at 20.26 while resistance is at 20.93.

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