Last Friday, on October 18th, the sugar futures for March delivery hit the highest level in 11 months – 20,16 cents per pound.
However, the price has already retraced form the high since then and is currently trading around 19,4 cents per pound.
A natural question arises: What are the near-term prospects of the sugar market?
The reason for the recent strong rally in the market of sugar is that fire in the world's biggest sugar-exporting terminal Copersucar. It is located in Brazil. According to the preliminary report, the fire destroyed 180 000 tons of sugar.
Still, the trading experts from the Option Trading Department of Masterforex-V Academy assume that the major bullish factor is the fact the shipping terminal in Santos ( a major Brazilian port) has suspended its work. This terminal accounts for 20% of the entire global sugar trade.
They say the terminal won't operate for 4 to 12 months. This may cause major delays in sugar shipment.
The list of other bullish factors includes:
Poor weather conditions in Brazil. The rains are delaying the harvesting campaign, thereby diminishing the quality of the sugarcane yield.
Higher gasoline prices in Brazil )+6%). This has contributed to higher production of ethanol (made from sugarcane).
Russia and Ukrain are also seeing beetroot harvesting delays due to poor weather conditions.
As for the bearish factors restraining the rally in the international market of sugar futures, there are 2 of them:
Global oversupply and India's intension to increase the production and export of sugar. India is the world's 2nd biggest sugar exporter.
Trading Recommendations
The current conditions in the global market of sugar present no interest to option sellers.
As far as sugar futures are concerned, we may go bullish if the price retraces to the sloping channel. Still, if there is force-majeure, the price may break the SC and initiate a reversal.
