From the June 01, 2010 issue of Futures Magazine • Subscribe!

Sugar futures: sweet and low

After hitting a 29-year high in 2009 and spiking to 30¢ per pound in February 2010, sugar took a nosedive to 14¢ in early May. Analysts expect bearish prices to continue.

“Sugar is tied to the dollar. As the dollar goes down, sugar goes up. As the dollar rallies, all the commodities get hit. For now, I don’t see any change in the fundamentals, and for that reason, I recommend [traders] stay out,” says John Caiazzo, president of Acuvest. He expects sugar to trade sideways until it builds a base, and says it will remain in a range between 13¢ and 15.5¢ by mid-June.

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Darin Newsom, senior analyst at Telvent DTN, says the recent bearish conditions for sugar are due to short supply. “Non-commercial traders started getting out of their net long position and it drove the market considerably lower,” he says, adding, “It looks like the fundamentals are going to [remain] bearish heading into the new crop year, and that’s going to mute some of the buying interest.”

Spencer Patton, chief investment officer at Steel Vine Investments, says plentiful harvests in India and Brazil meant higher supplies. He says the bull market in sugar has run its course and expects prices of 12¢-14¢ in June. “The long-term trend is going to be down, especially as production has been very solid for the crop year,” he adds.

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