Unfavorable Weather & Currency Spikes Sugar Futures

The strengthening of their currency and torrential rain in Brazil is reported to send sugar futures to a one-week high.  The sugar market is in a strong downtrend (in my work), but the mere threat of rain disrupting the country’s main growing region’s sugar harvest has the potential for traders to re-think sugar prices.

Rain that is expected in certain sugar-cane growing regions threaten the crop’s yield potential and an industry group says the harvest is already forecasted lower than last year’s.  Plus, the Brazilian Real was boosted significantly yesterday after the federal reserve chairman, Ben Bernanke, quelled the view of his bank curtailing stimulus – creating the environment and incentive for Brazilian sugar millers to sell in US dollars.
           
The combined events of UNICA reducing its forecast for Sugar production and a forecast for rain in southern Brazil has led to some short covering by Speculators in the sugar market,” says Kevin Riordan, director of research at Capital Trading Group in Chicago, regarding the current sugar futures situation.

The technical trend for sugar futures is still very much down, with no bottom yet in sight.  I view today’s spike in prices as an opportunity to reenter “short” with the trend at higher sugar prices.

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