Monday, Sugar futures have successfully surged to its two-month high on the news about the investors covering their short positions subsequent to a tax change that will make ethanol in Brazil more modest.
"It is expected that on a forward basis, ethanol will recover its price advantage towards the end of 2017," Senior Trader at Sucden Financial Research, Nick Penney told reports.
On the latest reports about the cane production, it showed that the average percentage of the cane-to-ethanol production was higher than the expected. According to Societe Generale, sugar right now is considered to be oversold and susceptible to investors having to cover their shorts in the current period.
"Although many things have to happen to bring the sugar market in NY to a more lucrative level, we are fully convinced that we have already seen the year's low," Archer Consulting told reports.
The declining oil prices or simply the strong devaluation of the Brazilian Real could cause an antithesis to that postulation, they added.
In other agricultural futures, Cocoa Futures for the month of September was seen performing flatly at $2,060 per metric ton as the Arabica Coffee for the similar month was seen surging at about 1% to fix at at $1.3925 for each pound.
Frozen Concentrated Orange Juice for the period of September declined at about 3.4% in which had closed at $1.3165 for each pound. Also, the Cotton Futures was able to soar by 0.1% to 68.86 cents per pound.
The Sugar#11 in the ICE Index has managed to continue its bullish trend in its recent trades. The bull-dominated candle added 3.76% which ended at 14.91. Such move can signal a potential upsurge further in the coming trades of Sugar in the ICE Index.
According to Sucden Financial Research, the sole reason as to why the futures was dominated by bulls is because of the fact that investors are again covering their short and also the recent reports of the Brazilian Government’s plans on tax reduction for the Ethanol futures last Friday. To add, Brazil is one of the biggest producers of such, and cane is a staple ingredient in sugar and ethanol production.
It is now heavily believed that the demand for ethanol will now surge just right after the announcement by the Government was done.
Furthermore, the Relative Strength Index of the futures was also seen surging up to the 61.57 region. It last reached this level last February of the current year.
Lastly, the Coppock curve of the stock was at 9.29 – a high positive level that would recommend a buy for the Sugar Futures.
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