The market is showing resiliency in the face of volatile risk sentiment is another sign that sugar’s net spec long position has been trimmed enough to allow the market to sustain upside momentum. Sugar continues to find support from a tight near-term Asian supply situation.
China sold all 108,000 tonnes of sugar offered at their auction on Wednesday. Compared to some other commodities that are released from their state reserves, this indicates that Chinese sugar demand should remain robust even if they release their entire target of 1.5 million tonnes. Brazil’s Center South region will receive rains over the next two days, which may not disrupt their harvesting or crushing given that output has dropped down over the past month or so. On the other hand, the Thai cane harvest is approaching full speed but is still showing early signs that both their cane and sugar production will decline from last season’s levels. A key ethanol producer in Brazil is idling their plant so that the cane can be used in other nearby plants which can produce both ethanol and sugar and this illustrates the tightening sugar situation even before the off-season begins.
TODAY’S MARKET IDEAS: Funds have been active buyers of many different commodity markets in the past week. Near-term buying support for March sugar moves up to the 21.96-21.82 zone. Next resistance is at 22.59 and 22.95 with 23.84 as upside target.