Are supply and demand factors mightier than technical factors in setting agricultural commodity prices?
In raw sugar, at least, that looked the outcome on Monday.
As markets opened, the sugar market looked like it was confronting a "bearish bias" on supply fundamentals against price gains suggested by chart signals, analysis by Marex Spectron showed.
But with prices looking to end the session notably lower, down 1.7% at 14.16 cents a pound for March delivery, it looked like the supply fundamentalists who were gaining the upper hand.
The upbeat chart analysis was based in part on ideas that a price range that futures have trod for some four months has identified "good support" towards 13.70 cents a pound, for New York's spot March contract.
The May lot, meanwhile, had in the last session closed back above its 50-day moving average on a continuous chart for a nearest-contract-but-one, and only just shy of the 100-day line.
"We would like to see close over the 100-day moving average," to inspire some fund short covering, "but we feel the market is very close to breaking higher", Marex technical analysis showed.
However, supply and demand fundamentals raised doubts that prices "will break out very significantly to the upside", the London-based broker said.
Higher prices would inspire Brazilian mills to raise the proportion of cane they turn into sugar rather than ethanol – reversing the trend of recent weeks, a dynamic which, in curtailing output of the sweetener, has been seen as supporting values.
In fact, the "fundamental consensus… has, we think, a bearish bias", Marex said, flagging expectations of a "big surplus" in world production in 2017-18, a surplus which was "originally 5m-7m tonnes, but this week we heard of a rather shocking outlier at 9.5m tonnes".
Separately, analyst Judith Ganes-Chase, at J Ganes Consulting, also noted a "clear consensus that production is headed higher", adding that "with good weather, these views seem to be adjusting upwards".
Still, there is hope for bull from Brazil too from supply and demand fundamentals too, in the potential for a weak outlook for output next year, if ongoing dryness worsens the prospects for cane crops already compromised by a weak replanting programme.
"One argument which seems to be solid is that, if weather and age combine to lower Brazilian sucrose production, then the market will 'see this coming', and shoot up," Marex said.
However, such a rally would also sow the seeds of its own destruction, in boosting the appeal of turning what cane there is into sugar rather than ethanol, and so boosting supplies.
Maybe prices really stay rangebound after all.
By Mike Verdin