Commodity Wrap – Sugar, Silver, OIL, Soybean

1:46 PM September 26, 2018

In this week’s commodity wrap we present you 4 markets that look interesting or/and have posted some major price moves: Sugar, Silver, OIL, Soybean


  • September has been wild for sugar prices – they rallied sharply only to turn lower
  • We suspect that a moderate short covering was responsible for a price pick-up but a sustained surplus encouraged traders to enter fresh shorts
  • Australia plans WTO intervention to stop heavy subsidies for cane-growers in India
  • Both Australia and Brazil plan action to fight off export subsidies in India
  • Elevated USDBRL keeps pressuring prices of Sugar and Coffee, investors should watch incoming elections (7 October)
  • A rally in oil prices could support Sugar prices over a medium term as more cane will be used for ethanol production

Sugar positioning remains low and could help prices if fundamentals improve or/and BRL regains traction. Source: Bloomberg

Sugar prices have reversed a rally in a sign that bears remain strong. The $10 zone is still crucial. Source: xStation5


  • Silver/Gold ratio close to multi-decade lows
  • Silver unable to benefit from a pick-up in gold, platinum prices
  • Silver is way below forecasts from major producers ($17-19/oz) – could trigger supply adjustment
  • ETF holdings still relatively large, could depress prices if US dollar remains strong

A silver/gold price ratio is at very low levels indicating a relative value in silver. Source:

Silver prices diverged from gold, platinum – is there a convergence opportunity? Source: xStation5


  • Based on the historical output data OPEC should have about 1.3mbd of spare capacity, mostly controlled by Saudi Arabia
  • Even 1.5mbd of supply is under threat this year
  • A season of maintenance at the US refineries could reduce demand, push inventories higher
  • EU, Russia and China plan to create a special vehicle to bypass sanctions on Iran - US has threatened to enforce sanctions anyway
  • Supply factors to determine oil prices in a short run, relief possible after Iran sanctions kick in

OPEC may have a limited capacity to address declining supplies from Iran. Source: Bloomberg

A strong upwards trend remains in place, OIL (Brent) prices are facing a 61.8% fibo of the last major bear market. Source: xStation5


US and Brazilian soybean prices have diverged massively due to trade conflict with China

Any deal with China (Chinese buyers had to turn to Brazil for soybean imports after tariffs were applied) could be very positive for US prices

Technically a pin-bar formation on the monthly chart could raise hopes for price recovery

Soybean prices had hit the lowest levels of this decade in September but managed to recover. Is the worst over? Source: xStation5



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