Sweet and Sour Sugar Fundamentals
World Sugar futures prices have moved sideways the past several sessions, as bulls and bears battle it out for control of the market. Making the bulls’ case is the announcement that Russia will raise the import duty for Raw Sugar, which should in turn raise near-term demand as importers obtain supplies ahead the imposition of the duty. Meanwhile, Brazil, the worlds largest producer of Sugar, is expected to see more of its cane crop go towards the production of Ethanol in the coming years, which would cut in to the amount of cane available for Sugar production. Bears counter with a report from the International Sugar Organization last week, which estimated a world Sugar surplus of 10.8 million tons through September of 2008, as production soared to a record 169.6 million tons. India, the world’s second leading producer of Sugar, is responsible for much of the surplus after producing a record 28 million tons this year. This comes at a time when China, the second largest consumer of Sugar, is expected to decrease it purchases as domestic production is predicted to increase.
Looking at the daily chart for October Sugar, we notice prices starting to form a symmetrical triangle pattern starting with the 8/16 lows of 9.08 and the 8/23 highs of 9.73. This pattern usually brings about a period of consolidation before the next move in prices. This morning’s current high of 9.56 is coming very close to moving above both the 20- and 100-day moving averages of 9.55 and 9.56, respectively. A weekly close above these key moving averages may spark fresh momentum buying, as short-term traders seek to cover short positions. The 14-day RSI has moved into neutral territory with a reading of 51.88. Major support is seen at the lows of 9.08, with recent highs of 9.73 looking to be stiff resistance. In early electronic trade, October Sugar is trading at 9.54, up 0.12.
Mike Zarembski, Senior Commodity Analyst
