Sugar Futures Crossroad, Seen “Balanced”

Swiss investment bank UBS has stated recently sugar prices (sugar futures) have been “skewed to the upside” due to excessive wet weather in Brazil, and borderline drought conditions in India.  This weather situation in the two most important sugar producing regions in the world has the potential to increase the volatility of the March Sugar futures contract.

The skew to the upside comment is meant to highlight, perhaps, sugar futures have run away higher on the aformentioned news, but has failed to take into consideration current sugar supplies from India and Thailand are already making up for Brazil’s sugar shortfall.  UBS went on to say the sugar (futures) market is currently “balanced.”

Bret Aaron, head of trading operations for Global Futures’ managed futures division in Encino, CA, stated this today regards the current sugar futures situation, “ …if monsoon rainfall is less than 90 percent of a 50-year average of 89 centimeters could mean India curbs exports of rice and sugar at a time when a severe water shortage in the United States is pushing key global grain prices higher as a result sugar has risen to their highest level in over 18 months on poor rains in all of the top three sugar producing states.”

Sugar futures are currently up, however, appear to be topping in the short-term.  I am looking for a pull-back, or a lower-risk opportunity, before initiating the next long sugar futures position.


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