Please try another search
A year-end sell-off is accelerating in raw sugar as concerns about demand are heightened by the new COVID variant, Omicron.
After a drop of almost 7% over two weeks, the question naturally popping into investors’ minds is whether this is a buying opportunity or is more patience required to lock in at the lower levels? If the latter is the case, then what should those levels be?
All charts courtesy of skcharting.com
Raw sugar had one of its biggest rallies in 2020, gaining 15% as it rose virtually non-stop from May through December last year after COVID disruptions to production meant unusually low global supplies.
This year was even bigger for the sweetener, as it gained 25% through September before hitting a speed bump in the final quarter.
Now, raw sugar is up about 20% on the year after a recent stretch of red ink—particularly, back-to-back weekly drops of more than 3% over the past two weeks—forced by a deteriorating demand outlook.
“Weaker demand ideas were caused by reports of new lockdowns in Europe as COVID returns there, and as reports emerge of a new variant discovered in Africa,” said Jack Scoville, chief crop analyst at the Price Group Futures in Chicago.
“Reports indicate that consumer demand has returned to the market but not in a big way. Ideas are that the supplies are out there but it will take a stronger price to get them into the market.”
Scoville said Indian producers and exporters were willing sellers at above 20.50 cents a lb. That would be a premium of almost 2 cents over Thursday’s futures trade in New York, where raw sugar hovered at around 18.60 cents a lb.
In Brazil, the top sugar cane growing country, processors were refining cane more for the biofuel ethanol than sugar, Scoville said.
“Right now, this trend is expected to continue due to the relative price spreads. The reduced production potential from Brazil for the current harvest is still impacting the market as cane production suffered last season. Daily charts also show that trends are down.”
There is a buying opportunity in raw sugar, but it will likely be a limited one where the flat price reaches just under 19.50 cents a lb, said Sunil Kumar Dixit, chief technical strategist at skcharting.com.
But, the market could fall even further, to below 18 cents, presenting a continued shorting opportunity or chance to buy even lower, he said.
“We see a short-term relief rally from the lows, with potential targets of 19.20 and 19.28, which can extend to 19.48, subject to prices holding above 18.88,” said Dixit.
“Currently we don't see any major upside reversal beyond 19.50. The upside potential is limited to between 19.20 and 19.48.”
But the downside could also extend to 17.70, cautioned Dixit.
“The long term monthly chart is showing a bearish correction of two months, back to back and currently breaking below the previous months low,” he added.
Long or short, remember the trend is your friend; do temper your expectation with moderation.
Best of luck and a happy weekend.
Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.
Cocoa prices have surged this year, reaching record highs this year. This remarkable surge, outpacing even Bitcoin's gains, marks a significant departure from historical trading...
Homeownership is the quintessential American dream, but it’s become increasingly elusive for many households. A multitude of factors, including soaring home prices, elevated...
Brent crude oil continues its rally, reaching peak values since early November 2023, with prices around USD 87.00 per barrel. Investor concerns over commodity supply, particularly...
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.