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Sugar Downside Breakout with Huge Net Spec Long; Increasing Selling

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sugar-cane-595The downside break-out overnight with speculators holding a near record net long position opens the door for a sharp corrective break over the near-term. Given the lack of upside reaction to several positive outside markets yesterday, long liquidation appears active today. Even the cyclone threat of too much rain in cane areas of China failed to support. Sugar’s lackluster price action yesterday came on a day that crude oil made a new 15-month high, corn posted a new high close and the Brazilian currency made a 2-month low, all of which should have provided sugar with carryover support. Sugar mills in India’s state of Maharashtra will be allowed to start this season’s operations on November 5th after concern over heavy rains that would delay harvesting. Thailand would be a major beneficiary if a La Nina weather event can start up by year end as their harvest will not reach top speed until December.

TODAY’S MARKET IDEAS: Prices remain vulnerable to a downside breakout move if risk appetites start to erode. Near-term resistance for March sugar is 22.80 and 22.91, with 21.59 as initial downside support. Look for selling to accelerate on a move under 22.22.

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