Sugar may have to rely on a bullish shift in supply-side news in order to lift clear of the recent lows. India production is slow to develop and next seasons Brazil production is uncertain with many traders expect just a minor improvement. March sugar pushed down to the lowest since August 4th but put together a sizable recovery to finish with a moderate gain and a reversal yesterday. Even so, the market finished more than 8% down for the month of November for a second sizable monthly loss in a row. Sugar found some benefit from a huge rally in crude oil prices after a deal to limit production was struck between OPEC and non-OPEC members, but a lackluster price reaction underscores the shift in emphasis by Brazilian mills away from ethanol production and towards sugar.
Brazilian sugar production for 2017-18 could climb even as prices fall because millers have hedged a large portion of their exportable surplus according to Datagro. Other key trade houses show only a very small increase in production and lower cane output. Datagro estimates that millers in the Center South region have already hedged 60% of the exports at higher levels, but also estimate that higher sugar production will require Brazil to import a record 1.4 billion liters of ethanol for the 2017-18 season. Workers at Brazil’s Santos and Paranagua ports did not join a national strike by port workers, but the potential for any serious supply bottlenecks would be very low this late into the season. As an offset, French producers could boost beet plantings by 20% next year ahead of the end of EU quotas.
TODAY’S MARKET IDEAS: Sugar is in need of fresh bullish supply news and may receive it soon if Indian and Thai production falls short of expectations, but March sugar needs to climb above the 20.53 level in order to turn the technical outlook positive. Near-term support for March sugar is at the 19.66 to 19.50 zone while resistance is at 20.15. Consider buying breaks with 21.04 as target.