Apr 17, 2018 – Commodity Weekly – Crude rallied on Syria despite increased US inventories, sugar depressed further, grains helped by cold weather
Commodities were pushed higher last week by weaker dollar and geopolitical tension, namely US-Russian as the most significant. However the grain sector was supported weather factors, especially in the US mid-west. Sugar prices were further depressed by bigger than expected Thai crop despite speculators trimmed some shorts on profit taking.
The recent US attacks on Syrian chemical weapon factories helped to boost the price of oil, despite the fact that US production and inventories keep increasing. The Baker Hughes rig count increased to 815 oil rigs last week while the prices rallied to new highs. In WTI the key levels to watch are $69.50-70.50 resistance zone to the upside while the recently broken resistance zone $66-$66.60 will serve as support to the downside.
US farmers are now caught in a little trapped as the unusually tough winter causing damage to the winter wheat on one hand will cause delays the soybeans and corn planting. The USDA Wasde report released last week increased the estimate of Global wheat supply mainly due to better than expected production estimates from Morocco, while the rest is the world was balanced. Argentine and Brazil corn production will be down 14.5mil bushels compared to record last year and the reduced exports should impact first half of the US 2018/19 marketing year. Technically prices should however first take out the 392 – 395 highs before we can speak about further upside potential.
Prices of raw sugar declined further on higher than expected Thai crop and the threat of Indian Exports to hit the market. While some speculative shorts were reduced there is still plenty of bears in the market. Closing these positions could mean that we can see a correction at one point but currently the fundamentals are not predicting any hope prices could rally significantly. Currently prices are well below the production prices in India (and many other producers) and sugar mills arrears of payments to cane farmers are mounting that could cause crack down on mills in the country soon. According to last ISMA estimates the country has a 4 mil ton sugar overproduction while carryover stocks could be the same amount. So approximately 8 mil. tons needs to be exported…
Good Luck and remember to watch your risk and be consistent
Mr. Tech Man
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