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Sugar Enters Technical Bear Market as Prices Hit Six-Month Lows

December 14, 2016 at 18:11 by Andrew Moran

Sugar futures are continuing their decline as traders dumped the commodity during Wednesday’s trading session. This comes as a new report projects that there would be record sugar output in 2017. The question is now: how low are sugar prices headed over the next 12 months?

March Sugar No. 11 futures tumbled 3.1% to 18.04 cents per pound at 16:46 GMT on Wednesday on the ICE Futures exchange. Sugar prices are now trading at their lowest levels since the beginning of June. Since hitting its most recent high on October 5, sugar futures have plummeted more than 20%. This means sugar is now in a technical bear market.

Unica, a sugar industry organization, said on Wednesday that output will soar next year. Brazil, the world’s largest producer and exporter of sugar, has seen its output surge 61% in the second half of November. As Brazilian mills look to produce more sugar than ethanol, sugar output in 2017 could reach a record high.

This led to investors partaking in a selloff, which helped sugar shed its value.

Moreover, the Federal Reserve is expected to raise interest rates on Wednesday. This matters for sugar because this will further strengthen the US dollar. With the Brazilian real weakening against the greenback, this could encourage more sugar producers to lift production efforts.

Late last month, a report from the International Sugar Organization (ISO) forecast that global sugar supplies and demand will return to balance in 2017/2018 due to normal weather conditions.

Despite the plunge in sugar futures, the market remains long as bulls outweigh the bears. According to the US Commodity Futures Trading Commission (CFTC), bulls have nearly 175,000 more contracts than the bears.

The sugar market started off 2016 strong, but it has been in a slump for the past two month as the strong fundamentals are making sugar bearish.

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