Background

All the time-based technical measures for sugar (SBV6) read as “strong buy”. The spot price at US cents 20.39/lb (1249 GMT) is at the highest level since November 2012.
Therefore, if one is a short-term horizon trader I would advocate being a buyer of sugar. However, it should not be assumed that sugar prices will shoot higher indefinitely.

More sugar supply

I say this because even with strong sugar prices forecast into Q3 there is a threat posed by enhanced Brazilian output that can counteract a squeeze on supplies from two seasons of disappointing rains in India.

Significantly higher sugar production is expected in Brazil which will most likely see more sugar supply reaching the market from Brazil in the coming months. Expectations from official Brazilian crop bureau Conab of a 3.0 million tonne rise to 34.3m tonnes of sugar output from the country's key Centre South region in 2016-17. In Brazil, 11% more sugar cane is expected to be turned into sugar than last year.

This would imply a lower sugar price of US cents 17.5/lb by year's end.

Management and risk:

Parameters: Sugar October 16 SBV6 US cents/lb
Entry: Sell 20.62 13:30 GMT
Targets: 18.12 … 17.75 … 17.50
Stop: 22.85
Time horizon: Medium-term