Sugar Prices Overbought After Surge in OI
Sugar prices are well into overbought territory after 6 positive daily results in a row and a rally to 5 1/2-year highs. For the week, March sugar finished with a gain of 89 ticks (up 4.4%) and a fourth positive weekly result in a row. Crude oil and RBOB gasoline extended their recovery moves up to 3-week highs, which provided sugar with carryover support as that should strength near-term ethanol demand. In addition, the Brazilian currency climbed up to a 6 1/2 week high which also gave a boost to sugar prices.
Cocoa’s 3-day rally going into the holiday weekend lifted prices up to the highest level since April. If global markets can regain and sustain a positive risk tone, cocoa should be able to remain in a short-term uptrend. For the week, March cocoa finished with a gain of 153 points (up 6.2%) which broke a 2-week losing streak. While they showed mild pre-holiday strength, gains in the Eurocurrency and US equity markets provided cocoa with carryover support.
Coffee prices have had a bumpy ride since reaching a 17-month low in late November as they have been unable to climb back above their December highs. If recent short-covering has run its course, coffee may have a downbeat finish to the year. March coffee experienced the first close above the 50-day moving average since late September. For the week, March coffee finished with a gain of 7.60 cents (up 4.6%) which was a second positive weekly result in a row. While there is a wide range of early forecasts for Brazil’s upcoming 2023/24 “off-year” Arabica crop, Colombia’s annualized production pace has fallen to its lowest levels since mid-2014.
The market continues to see a clash of supportive outside market forces, strength in the stock market and in crude oil, as compared with very poor export sales news and increasing demand concerns. Outside market forces carried a positive tilt this morning which may help support. However, the decline in open interest as the market tested the November 16 high last week is a negative development. Light trading volume seems to be adding to the choppiness. The market recovered some on Friday after a limit down move on Thursday.
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