Sugar And Coffee Continue Last Week’s Plunge

August 29th, 2018


Category: Sugar

Sugar TRQ

(Seeking Alpha) – World sugar and coffee futures are members of the soft commodities sector of the agricultural markets and both trade on the Intercontinental Exchange. Both sugar and coffee have long histories as highly volatile futures markets. When it comes to sugar, the price range since 1971 has been from 2.29 cents to 66 cents per pound. In the coffee futures arena, the band has ranged from 41.5 cents to $3.375 per pound since 1973.

As agricultural commodities, the prices of sugar and coffee depend on the weather in the leading growing regions of the world. At the same time, crop diseases can threaten annual crops from time to time. Both coffee and sugar prices are a year-to-year affair as both have limited shelf life when it comes to storing the commodities. In October 2016, the price of nearby ICE sugar futures hit their move recent high at 23.90 cents per pound. The following month, coffee hit its peak at $1.76. Since then, it has been all downhill for these two soft commodities. In August, coffee hit its lowest price in a dozen years, and sugar fell to a decade low. Both soft commodities have one significant factor in common, the world’s leading producer and exporter are Brazil.

World sugar futures drop below 10 cents

The price action in the sweetest commodity continues to sour as the price has done nothing but make lower highs and lower lows since October 2016.

As the weekly chart shows, the consistent downtrend in the ICE sugar futures market sent the price to a low of 9.91 cents last week. The slow stochastic, an indicator of price momentum, has declined into oversold territory along with the relative strength index. Weekly historical volatility at the 17.44 percent level is unusually low for sugar futures as the decline in price has been slow and steady. At the same time, the total number of open long and short positions in the ICE futures market has climbed to an all-time peak at 1,058,041 contracts as of the end of the week of August 20. Falling price and rising open interest is typically a validation of a bearish price trend. At around the ten cents per pound level, the technical position of the sugar market remains bearish.

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