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Sugar Hits Three Year Low as Bearish Sentiment Mounts

by on December 18, 2013 5:22 pm BST
 

Sugar extended its sharp decline to three-year lows with large harvests out of Brazil, India and Thailand that are oversupplying the market. Global sugar surplus will exceed global demand by 8.3 percent, which is higher that was originally foretasted for the 2013-14 season. This equated to a sugar supply of 5.05 million metric tons bigger than demand, .39 million metric tons higher than expected.

Germany-based F.O. Licht GmbH, which releases an international sugar and sweetener report, said “bearish sentiment continued to prevail in the sugar market in early December and there is little indication that this may still change any time soon.”

Sugar No. 11 futures have been hit ever since hitting the yearly high of $20.16 on increased supply. F.O. Licht GmbH also included that “over the medium term, however, sugar remains vulnerable to additional losses due to an oversupplied world market.”

Soft commodities have been chopped down this year, and sugar is no exception. However, the decline has been purely fundamental, and Tom Kujawa of Sucden Financial Ltd. said that little have changed fundamentally. “The market consensus essentially reflects the perceived, expected or predicted surplus year and particularly pressured in the coming the second quarter,” he said.

Sitting at the three-year lows, the price has been cut by more than 50 percent.

1D Chart of SB (Sugar No. 11 Futures, 3Y Chart)

1D Chart of SB (Sugar No. 11 Futures, 3Y Chart)

The four year daily chart shows that there is some demand sub-$15 given that fundamentals do not get progressively worse.

1D Chart Chart of SB (4Y Chart)

1D Chart Chart of SB (4Y Chart)