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Sugar Can't Stay EnergizedPosted Sunday, February 28, 2010, at 12:49 PM
The month of February was the worst month for sugar prices since 1981. In the last four weeks, the market lost 6.62 cents per pound, or 22%. These losses came as the U.S. Dollar strengthened in value and speculators put their money into other, more lucrative investments. Bearish traders bet that the price would decline, as Brazilian sugar will be hitting the market soon, causing global supplies to balloon.
For two and a half years, sugar had been in a near-continuous upward frenzy, rallying prices up 260% to 30.40 cents/lb on February 1st. Global shortages, from India to Mexico, caused speculators to drive prices up over the last two years, while a weakening U.S. Dollar gave them a low-cost way to fund the trade. Now that these conditions have changed, many traders find themselves at a crossroads, unsure if the damage will continue, or if sugar can renew its upward rush. As of Friday midday, March sugar, traded on the ICE exchange in New York, was hovering near 24 cents per pound, a 10-week low for the contract.
Corn Riddled with Concerns:
Corn's 15-cent rally this week was the largest gain that market had seen in months. This week's bullish action was fueled by weather concerns and crop condition problems. As farmers look ahead to planting this year's corn crop, many are worried that frozen ground and leftover snow could put this year's crop behind schedule. Even worse, much of the corn from last fall that is currently in storage across the Midwest is riddled with mold, which can make the corn unmarketable.
Watching these potential supply interruptions, speculators pushed March corn futures up to $3.79 per bushel, a six-week high. Despite the recent upward action, corn futures are still down significantly from their New Year's high at $4.26 per bushel.
Crude Swings Wildly:
After pushing to a six-week high of $80.78 per barrel on Monday, crude oil experienced a series of tumultuous swings this week, dropping nearly $4 per barrel. The market was pressured downward by high inventories, high unemployment, and poor consumer confidence. On the other side of the spectrum, strong GDP numbers and Chairman Bernanke's renewed proclamation of low interest rates helped to support the market. With wild moves seen this week, many traders are eagerly awaiting the next round of economic information coming out next week. As of Friday midday, April crude oil was trading near $80 per barrel.
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.
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