SUGAR rebounds from local lows as oil prices rise 📈

Strengthening US dollar and improved supply outlook pressured sugar futures recent weeks. However, today, SUGAR is the strongest agricultural commodity, gaining almost 1.5% as oil prices rise. In the major sugar exporters like Brazil, sugarcane is utilized for both sugar and ethanol production—the latter serving as a biofuel alternative to fossil fuels. When oil prices rise, ethanol production becomes more profitable, prompting producers to allocate a larger portion of sugarcane for ethanol at the expense of sugar production. This shift may reduce the sugar supply in the market, potentially leading to higher prices.

• On November 21, the International Sugar Organization (ISO) reduced its 2024/25 global sugar deficit forecast to -2.51 MMT, compared to an August forecast of -3.58 MMT.  ISO also raised its 2023/24 global sugar surplus expectations to 1.31 MMT from an August projection of just 200,000 MT.  
• The USDA, in its recent annual report released November 21, expects that global 2024/25 sugar production will climb by +1.5% YoY to a record 186.61 MMT and that global 2024/25 world sugar consumption will increase below this level, at +1.2% YoY pace; but will reach a new record at 179.6 MMT.  However, also USDA forecasts that 2024/25 global sugar ending stocks would decline -6.1% YoY to almost 45.43 MMT.    

Commitment of Traders Report (31 December 2024) 

• Reading the sugar CoT report from 31 December, we can see a significant reduction in short positions of Commercial traders (producers/merchants) suggesting that commercial participants are less bearish on sugar prices, possibly anticipating price stabilization or even higher prices.
• However, the notable increase in short positions of large speculators in Managed Money group indicates that those market participants are much more bearish. However, a lot of this positioning may come from 'trend tracking' strategies or multi-asset managers, and we can assess that Commercials may have better insight into market momentum. 
• Despite that change, we can see that Commercials still have net short position of almost -82.8k contracts, while large speculators in Managed Money partially unwind their still bullish bets with net long position at almost +50k futures contracts on sugar.

Commercial Short Positions: 409,112 contracts (decrease of 14,004) with only 1146 contracts increased in Longs to 326,346

Short Positions: 106,871 contracts (increase of 18,142) with only 903 contracts increased in Longs; to 156,781 contracts

SUGAR (D1, H1 interval)

In general, sugar supply outlook is still more favourable for bears, however speculative attempts to lift sugar prices may be in progress, especially if oil prices rise further as sugar market hits the oversold territory after dropping from almost 24 USD to 19 USD on ICE.

Source: xStation5

Source: xStation5