02-26-2010: July World Sugar #11: Tightness Eases on Huge Crop from Brazil
July World Sugar #11:
July World Sugar #11:
Long liquidation by funds trying to hold on too long has been the primary influence on world sugar prices. There is lack of aggressive buying in the cash market. Another record crop of cane sugar from Brazil is in the offing. Thus former tightness fears are being eased. The European Union has approved export licenses for 99,871 tonnes of out-of-quota beet sugar. Some sales illegal under World Trade Organization rules are continuing. A weaker U.S. Dollar and strength in the U.S. Dollar helped boost sugar prices. Energy price increase helped add a outside market boost. News that Pakistan bought 50,000 tonnes on a price break this week and that India was also still in the market to buy more sugar added to a positive tone. The U.S. or Mexico may import sugar soon forcing India to become more active on price breaks. Sugarcane weather in China sees rain that favors early growth of the crop there. A similar sitation exists along the coast of Queensland, Australia, where cane sugar is grown. In general the world raw sugar market is reeling from a run-up that left demand behind. Traders sold most commodities when U.S. data set a bearish tone on ideas of U.S. economic recovery recently. The International Sugar Organization expects production to come in 5.6% short of demand in the 2009-10 crop year. But the situation would return to a modest surplus in the following October-September crop year it said. Sugar is finding buying from end-users as prices pull back but most agree prices are way too high. While the world continues to deal with tight supplies, Sugar peaked at around 29 cents on February 1st, and by February 23rd has dropped below its 100-day moving average. India has extended its ban on sugar trading until September 30, 2010. The ISO estimate of world production is a suplus of 0.75 million tons in 2010-2011. Sugar exporter Czarnikow claims prices will have to go higher to ration demand. Estimates of sugar production are frequently drastically revised, and at present it looks like most revisions will be upward for production, downward for prices.
35.0I T 2/24
I CSCE- Jul-10 Sugar #11 World, 112klb c/lb Cm.=0.03 Lim.= 1.0
I
I
I
32.5I_________________________________________________________________________
I
I
I
I
30.0I_________________________________________________________________________
I
I
I
I
27.5I_________________________________________________________________________
IX
IXO X
IXO XO
IXO XO
25.0I_OX_______________________XO_____________________________________________
I OX XO
I OX XO
I OXO XO
I O O X XO
22.5I___O________________XOX___XO_____________________________________________
I O XOXO XO
I O XOXOX X
I O XOXOXOX
I O XOXOXOX
20.0I___O________________XO_OXOX______________________________________________
I O X O O
I O X X
I O XO X
I O XO X
17.5I___O______XO________X____________________________________________________
I OX X XOX X X
I OXO XOXOXOX XO X
I OXO XOXOXOXOXO X
I OXOX XO O OXOXO X
15.0I___O_OXOX____OXOXO__X____________________________________________________
I OXOX OXO O X
I O OX OX O X
I OX OX O X
I OX OX OX X
12.5I_______O_____O___OXOX____________________________________________________
I OXOX
I OXO
I O
I
10.0I_________________________________________________________________________
I
I
I
I
7.5I_________________________________________________________________________
I
I
I
I
5.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
1 11 1111
4577013471234467781219900022
2101100112101211310020101210
7839752692175968154464775814
The above point-and-figure chart is giving a conventional buy signal.
We are headed toward a cyclical high and a seasonal down period.
Our best-performing internal program is "Pattern." It is giving a buy signal.
Results of "DCV" for World Sugar #11 (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system is working on a long-term sell signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $1,120. Initial margin on a single contract is $1260. Use of options is not advised.
Scale trade sellers are entering the market in this price range for the long term.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Red is small speculators. Green is large speculators. Blue is commercials. Large speculators with the best track record are remaining long.
The average volatility shown below suggests that the current uptrend remains intact from the last volatility low point.
Our software has taken the unusual position of believing that there are no options currently available anywhere with a profitable potential for sugar. So we are qualifying this trade by not recommending it necessarily, but if you expect sugar prices to decline drastically, one possible trade might be to Sell the World Sugar October 19.5 Call @ the last traded price (4.25 or better), although this is not a good price and the odds may not be in your favor at that price.
What the Jul. - Oct. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up. The best time to enter or leave the above spread is when it is at 1.11 or narrower selling the far as prices are falling and then buying the near, and exiting or entering when it is at 2.12 or wider buying the far as prices are rising and then sellling the near.
Here's an intraday chart for the previous day ( 2/24 ).
Risk Versus Opportunity Report
________________________________
SBN0 July World Sugar
High Price: 24.88
Current Price: 22.71
Low Price: 18.17
Risk: -0.202
Opportunity: -0.422
(O/R) Ratio = 2.092
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | - 1 |
| Nirvana Chart | + 1 |
| News | - 1 |
| Point & Figure | + 1 |
| Cyclicals | + 1 |
| Seasonals | - 1 |
| Internal System 1 | + 1 |
| Internal System 2 | 0 |
| Third System | - 1 |
| Commitment of Traders | + 1 |
| Historic Range | - 1 |
| Range/Volatility | + 1 |
| Level Table | - 1 |
| Other Factors | - 1 |
| Total | - 2 |
Place 23 July World Sugar #11on a Sell Watch with stoploss @ +1.00 above the get-in point.________________________________________________________________________________________________________C.H.
