Will a strong crude market raise sugar prices?

January 9, 2018 01:22 PM


General Comments:  Futures were lower in both New York and London to start the new week.  Speculators were the best sellers on ideas that the upside potential in prices was limited. Futures have held resistance areas and tired speculators are now liquidating.  It is possible that a correction to lower prices is coming, but the market could remain rather strong even if a correction does appear.  The crude oil market is firm and could help keep sugar prices high if more cane gets diverted into ethanol production.  

Price action until now has been strong due to the strong demand for ethanol that has diverted some Brazilian mill production away from sugar. Mills in Brazil have decided to make more ethanol as world crude oil and products prices have been very strong. Ideas are that these prices can continue strong as OPEC and Russia have agreed to keep production constrained compared to world demand. There are also ideas that index funds will add significantly to long positions in the rebalancing operations later this month. 

Overnight News:   Brazil should feature showers and storms each day, with best amounts and coverage over the second half of the week.  Temperatures should be near to above normal 

Chart Trends: Trends in New York are mixed. Support is at 1460, 1420, and 1390 March, and resistance is at 1500, 1520, and 1550 March. Trends in London are mixed to up with no objectives. Support is at 385.00, 382.00, and 367.00 March, and resistance is at 395.00, 397.00, and 401.00 March.


General Comments:  Cotton was a little higher after an early rally attempt found some long liquidation. Trends are turning sideways in front of the USDA reports that will be released on Friday. Price Group expects few changes to U.S. production estimates as the cotton production appears to have held well. USDA can show increased export demand and slightly smaller ending stocks, although overall supplies should still be big. 

However, the hurricanes and the freeze appear to have really damaged quality and the quality losses have forced mills and exporters to pay up for better quality cotton. Producers remain limited sellers at best. Prices can remain generally strong even if a short-term top has been found. Mills are caught unpriced on a lot of purchases. The On Call data from USDA each week has been given as a major reason to expect higher prices in the next month. Mills will have to pay up again to get covered due to the recent rally. 

Overnight News:  The Delta and the Southeast will get chances for precipitation starting about Thursday.  Temperatures should be above normal through Thursday then below normal.  Texas will see mostly dry conditions. Temperatures will be mostly above normal today and tomorrow, then will trend to below normal. The USDA average price is now 75.71 ct/lb. ICE said that certified stocks are now 47,665 bales, from 47,665 bales yesterday.   

Chart Trends:  Trends in Cotton are mixed.  Support is at 7720, 7700, and 7670 March, with resistance of 7940, 7960, and 8000 March.


General Comments:  FCOJ closed a little higher and held support areas on the charts.  The current weather is good, but the crop is small anyway, and the charts show that a potential short-term bottom has formed. USDA could cut its production estimates a little bit again on Friday.

Overall weather conditions are considered good in Florida at this time, with mostly dry conditions, but with cooler temperatures that could help acid formation. The harvest is progressing well and fruit is being delivered to processors and the fresh fruit packers. Trees in Florida that are still alive now are showing fruit of good sizes, although many have lost a lot of the fruit. Florida producers are actively harvesting and performing maintenance on land and trees.  Processors mostly getting field-run fruit. FCOJ processors are also getting imports from Brazil, Mexico, and Europe

Overnight News:  Florida should get mostly dry weather and above normal temperatures.  Brazil should get scattered showers and near to above normal temperatures.  ICE said that no January deliveries have been posted yet.

Chart Trends: Trends in FCOJ are mixed to up with objectives of 144.00 and 151.00 March. Support is at 137.00, 134.00, and 132.00 March, with resistance at 141.00, 145.00, and 148.00 March.

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About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988.