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Sugar - London No.5 - Potential Trade Idea - TrendFollower and Jim Rodgers

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I was listening to the recent interview that IG conducted with Jim Rogers, the famous commodity investor, and of course the Co-Founder for Soros Fund Management and the Quantum Fund. If you have not seen this interview then it is nothing special and the usual vagueness and spiel. You most probably can still find it on IG's platform and within the IG Community section. I was disappointed in the lack of any detail or substance within the interview which seemed a waste when you have a so called legendary investor in Jim Rogers. 

One thing that Jim Rogers mentioned was Sugar. He stated that Sugar was around 80% down from its all time high and at some point it had to go up and recover. It got me thinking. More and more sugar is being reduced in soft drinks and confectionary. More and more sugar substitutes are being launched around the world. More and more sugar alternatives are being introduced. This may have something to do with the depressed prices, demand and of course a glut of supply in Asia! Why must it go up?

I then conducted some research on the internet and established that Jim Rogers has been singing the 'Sugar Mantra' for well over a year now. You can by all means check this via Google to confirm this. I then carried out more research and he was humming this tune back in 2008 and singing this song in 2009. It seems he has been 'long' Sugar for over 10 years now. He will want to make the biggest return possible and will want as many people as possible to jump on his bandwagon. When everyone piles in, he will be exiting and profiting. This is why he is a billionaire. 

Then I began to think does Jim Rogers have his own sugar company somewhere in the world which is not doing as well as it could? Has he investing in Sugar producing companies and wants to raise the prices?

I looked at the Sugar - London No.5 chart on IG and it seems it is making new 'higher lows' since middle of August to date. The chart looks horrific from a long term trade perspective due to the sharp upward and downward moves. Risk management would be extremely tricky and it is not an easy trade at all. However, could he be right (timing would be key) in the sense that Sugar is about to go on an upward trend and could this trend if it ever happened be worth trading?

I shall be keeping an eye on Sugar going forwards via this new thread and commenting on the price action and any trends that materialise. At the moment it is trading above its 200 DMA but below its 20, 50 and 100 DMA. If it begins to trade above all four of these and the MA curves being sloping upwards then I may get interested. 

 

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The monthly chart on IG is as below:

2029783295_LondonSugarNo.5_20190306_18_48.png.ed9d231ba3c9c137054c5c75a350b113.png

Now below is the weekly chart on IG:

1938403603_LondonSugarNo.5_20190306_18_53.png.6a6514ce475b8a269472fa861c562dc9.png

Finally below is the daily chart from IG:

914328524_LondonSugarNo.5_20190306_18.53-2.png.9d78f770bdfe0ec397600091fc98b257.png

Jim Rogers has mentioned Sugar for a reason but how credible is his view of Sugar being a better investment than say Gold at this moment in time? It could be in the years to come but right now I am not convinced. There is an awful lot of supply / glut in Asia. 

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I have been following Jim Rogers since the interview on IG and it really is a bit naughty of him. He advocates 'Sugar' as one of the investments to make. So let us put trading to one side. From an investment perspective and looking at the price performance, I do not at this stage see a compelling reason to do so. There is a reported supply glut in Asia so any increase in prices could be false especially if the 'cartel' manufacture and force through a price increase. 

Not 'sweet' at this moment in time. I am following Sugar both fundamentally and technically so should this change then I shall share any of my findings. This also gives me a chance to assess the words of Jim Rogers.

When billionnaire investors are interviewed by brokers such as IG it does worry me a little bit. Anything they say could be taken very seriously by new and inexperienced investors and traders.

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I have been keeping tabs on Sugar since I started this thread. There may be a slight opportunity coming but I shall carry on monitoring the price action to see if it can hit that psychological 350 mark and if it does then how it reacts. 

Right now the price seems to be trying to stay above its 200 DMA which seem to be a good support level since the end of November 2018 onwards. 

If the price can manage to stay above the 350 mark then it will cross its 20,50 and 100 DMA. Right now none of the MA curves are sloping upwards which means there is very little bullishness about Sugar right now.

An an investor one could take a contrarian view and I have done that before as an investor and built up positions over a period of time. However, as a trader, I like to trade with the trend and that trend needs to show some strength and momentum which I am not seeing in Sugar. 

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I have been keeping close tabs on Sugar and it seems to be enjoying a brief upward turn.

2072703149_LondonSugarNo.5_20190318_20_16.png.8e7858387b0d619452767c35ec58e166.png

There are no real fundamental reasons why Sugar should go above and stay above $360 apart from 'Speculation'. There is a supply glut in Asia.

The one thing in favour of positive Sugar prices is that countries are trying to force the price upwards. This may see some upward price movement beyond $360 but I really do not know if that will happen. I am still at monitoring the price action stage at this moment. 

I shall keep those who are interested within the IG Community updated via this thread.

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Around the $340 level seems to be offering potentially some support to Sugar London No.5. I have been monitoring the price action since the Jim Rodgers interview with IG and so far there has been very little reason to either invest in this commodity or even trade it from a trend following perspective. There is volatility to swing trade it or even day trade / very short term trade it. 

Any break below the $336 level would be cause for concern for any one interested in investing in this commodity or even trade it on the long side. 

I shall continue following the price action and update on this thread accordingly but at this moment in time I personally will not be investing in Sugar on the long side. Nor will I be trading it either long/short based on current price activity and my own trading philosophy. 

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I wish IG had asked Jim Rogers in the interview why the Sugar prices were so low? It would have been very interesting to see what explanation he would have given. 

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2 hours ago, TrendFollower said:

I wish IG had asked Jim Rogers in the interview why the Sugar prices were so low? It would have been very interesting to see what explanation he would have given. 

This is exactly why we open the interviewee to the clients of IG. I don't believe this question was submitted by anyone, including yourself, and therefore it wasn't asked. If we schedule anything in the future with him, I'll let Community users know. 

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@JamesIG,

Prior to the interview I was not paying much attention to Sugar as the price action did not meet my personal trading crieteria. I only started taking an interest after watching the Jim Rogers interview with IG. I assume IG arranged and instigated this?

I was not even aware of the interview until it had taken place so yes you are right I did not ask any questions. Is it an unreasonable thought to think that IG could have asked such a question? Are you suggesting that an IG interviewer will only ask questions submitted by IG clients?

One of the reasons why I have started this thread is to monitor the price action of a specific asset that Jim Rogers talked up in the interview. I then want to see how the price behaviour compares with Jim Rogers’ conviction. Online media can be very dangerous. ‘Market Noise’. Do you recall the Cryptocurrency Interviews?

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I think in the interview Rogers explained why he was interested in sugar and it was quite simply that price was low from a historical perspective, and since commodities will always be worth something buying low would be the ideal strategy for the long term investor.

1016784170_LondonSugarNo.5_20190326_10_42.thumb.png.c285c824411e4cf1452cda60e5c75c0d.png

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@Caseynotes,

Yes you are right. Jim Rogers explained that Sugar is one of those rare commodities that is around 80% down from its all time high. So I can understand his investment sentiment. When I conducted some research shortly after the IG interview I realised that he was singing the sweet tune of Sugar ten years ago. He may even have his own Sugar company somewhere in the world! Therefore he needs the Sugar price to go up. Jokes aside and on a more serious note there is a supply glut in Asia. Some of the Asian countries are trying to push the Sugar prices upwards. 

What we do not know is if there is further to fall for Sugar? One may infer that the majority of the downside is priced in but we simply cannot be sure. Sugar has more alternatives now than it ever did. In India for example they can put Gur in Indian Tea. I have even been to Indian restaurants in the UK which have started to offer this. Also health concerns and healthy living is meaning that the Sugar intake amongst the western world and specifically the US is declining. I would imagine the potential is there for the same pattern to emerge in the UK and EU.

 Americans Keep Getting Smarter About Sugar

https://www.bloomberg.com/opinion/articles/2018-10-11/americans-cut-sugar-intake-in-decline-worth-celebrating

Even from a value investing perspective there needs to be a fundamental driver that one can see for a significant increase in Sugar prices to make it a compelling argument to invest in right now and not in six months, next year or even once the glut has substantially reduced. 

How Much Sugar Are We Eating?

https://www.sugar.org/diet/intake/

Declining Sugar Consumption in Australia

https://www.srasanz.org/sras/news-media-faq/sras-articles/declining-sugar-consumption-australia/

The UK Government has introduced the 'Sugar Tax' and this in theory should encourage the manufacturers to reduce the amount of sugar in foods and drinks. 

So if the trends in the future are likely to be continuation of the decline in Sugar consumption and the supply glut is only reduced more slowly then by investing now does not mean that the price of Sugar will not continue to go downwards. It also does not necessarily mean that it will be a good investment over say 5 or 10 years. 

Buying low would only be a good strategy if the price did not continue going downwards. Even if there is the potential of Sugar being a good investment then surely it would be worth buying in an uptrend albeit at the start of such a trend (from a value perspective) than now? Otherwise it is merely a buy low and hope it goes up strategy. 

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@TrendFollower,  fair point, he probably has already bought sugar and so would encourage others to follow, he also has a very big account, I wonder if he would even bother with a stop loss? After all price is at the market cycle low of the last decade and the all time low of the last 2 decades is not that far away at around 175, and sugar will always be at least worth something.

Certainly there are sugar alternatives but with hundreds of millions of people being lifted out of poverty world wide every year there is the case for increasing demand.

I think for him it's just a case of buying at the market cycle low and hoping for the best, after all it's worked for him so far.

Though not a bad looking speculative trade either.

image.thumb.png.7b56fff40769d67e3602be19cb415993.png  

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@Caseynotes,

Jim Rogers is a billionaire. He has deeper pockets than the majority of investors. His investments and capital can move prices both up if he buys and down if he sells. I agree that Sugar will be worth something but will it be worth what it was historically? I do not know the answer. Also I would rather invest in Sugar or trade it when an uptrend starts but I totally appreciate value investors wanting to buy at the cheapest and lowest price possible so they will want to get in before the uptrend starts. It is not something I would do but I appreciate those who may consider such a strategy. I would rather wait for an uptrend before either investing or trading it. 

I think there is a movement for providing people coming out of poverty healthy food and provide them with a healthy diet rather than sugar. It would not be responsible for allowing a country to allow those coming out of poverty to only afford sugar based food and drink. This will take time and will prove extremely difficult but Governments are aware of the need to provide a healthy diet to those coming out of poverty as otherwise they will end up in NHS, benefits and too sick to work which is not good for any economy with aspirations to be prosperous. 

Jim Rogers has made bad calls and bad investments in the past but he has made humongous  profits and made the right calls too. He has such deep pockets that he can afford to take a big loss or sit on a losing position for years and just wait. Most investors invest or trade to make a profit and they simply cannot afford to sit on losses for years upon years. He can.

Below is an article which is relevant to this specific thread that was available around six months ago:

Jim Rogers' Favorite Commodity Now

https://dailywealth.com/articles/jim-rogers-favorite-commodity-now/

Now have a look at what Jim Rogers was stating in the International Business Times back in 2010 so NINE years ago!

Sugar is white gold: Jim Rogers

https://www.ibtimes.com/sugar-white-gold-jim-rogers-411827

@Caseynotes, have a look at what happened to the price of Sugar after the article was published  by a billionaire and extremely successful investor in a credible and reputable publication like the International Business Times. Nine years is a long time and only a billionaire like Jim Rogers can hold a losing position or even a winning position where profits are declining each year over such a period of time. The smart trade would have been to short Sugar since that article in 2010. 

Now he is back singing the same tune and have a look at what is happening to the price of Sugar since his IG interview. 

I agree it could be an interesting speculative trade but this would be akin to gambling and hoping which is not a good investment or trading strategy. 

Now look at this article and in particular 2.

Three ETFs To Play Jim Rogers’ Advice

https://www.fool.com/investing/general/2010/07/15/three-etfs-to-play-jim-rogers-advice.aspx

I have copied and pasted below too in case the link does not work.

"2. Sugar 
Another investment idea Rogers recently threw out is sugar, a commodity that has seen its price tumble dramatically so far in 2010. Despite this large drop (or perhaps because of it), Rogers is extremely bullish on the "soft" commodity. "Not many things are 75 percent cheaper that 36 years ago, but that's true of sugar," Rogers said.

For investors seeking exposure to sugar, the iPath Dow Jones-UBS Sugar ETN (NYSE: SGG) is perhaps the best option. Unlike SLV and SIVR, SGG doesn’t offer exposure to spot prices, instead tracking the performance of a futures-based strategy. The note tracks the Dow Jones-UBS Sugar Subindex Total Return, which consists of futures contracts in sugar. The fund charges an expense ratio of 0.75% and is down more than 35% so far in 2010, by far the worst performers in the Commodity ETFdb Category. If you believe Jim Rogers, now could be a good time to buy SGG low [see Sugar ETF: Due For A Comeback?]."

So look what was happening to Sugar before 2010 when he was making the same arguments! His notion of something is cheap relative to history so it must be worth investing can be an excellent strategy but on this occasion it has simply not proved to be the case. Now for all I know Sugar may end up after this post going on a phenomenal multi year bull run. If that happens then fine. I would like to think that I am wise enough to trade Sugar on the 'long' side once a trend is confirmed and use leverage to make big returns. If not then I am happy just to monitor the price action for now.

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Looking at the current price action for Sugar - London No.5 and Sugar - New York No.11 there seems to be a slight disconnect.

601517597_LondonSugarNo.5_20190326_19.44-2.thumb.png.69b9deabcd8982d2f170911c3465efa6.png

1225931512_NYSugarNo.11_20190326_19_45.thumb.png.21611e54be6973d39b3f3943fe953dd7.png

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@TrendFollower, not sure where you are coming from really, from your previous posts I thought you were an advocate of Rogers, seems that was wrong.

Certainly none could dispute he has done well for himself on the basic principle of buying low at commodity market cycle bottoms and selling at market cycle highs, simple really.

It's easy to see from the long term chart why he considers this to be at or near the cycle bottom and yes he has deep pockets which was my point about whether he even needed to put in a stop loss, after all how low can it go, it can't go to zero.

And then there is the long term trend for all commodities, more affluent people use more of everything.

 

Chinese living in extreme poverty.

1990: 755.8 million

2015: 10 million

(World Bank)

 

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@Caseynotes,

Jim Rogers is an extremely successful investor and he is very wealthy. There is no doubt about that. That is what I advocate. Not sure about which specific posts you are referring to but it really does not matter. 

Yes, he has on many occasions explained his investment rationale of buying low and selling high. He is able to execute this rather well as he has an obscene amount of wealth and access to data and people that a normal investor would simply not have. 

It may seem easy to see why Jim Rogers considers this to be at or near the cycle bottom but he has thought this 10 years ago and felt like this over the subsequent years after that until this moment. This demonstrates that even he cannot accurately pick a time period of when the cycle has bottomed for Sugar.  If he cannot do it then a normal investor on the street is certainly not going to be able to do it. I certainly cannot but my trading philosophy does not require me to do so. I just need to make sure that should a breakout and an upward or downward trend emerge that I am wise enough to trade it. 

If your premise of more affluent people use more of everything is used in investing specifically in Sugar then why has the Sugar price not been going up and up over the past few years? There is a higher middle class in India which is booming and expanding beyond recognition. The wealthy are getting more wealthier. Yes there is a sugar glut in Asia but is that the only reason? Could it be that demand is declining? Now I am being ****'s advocate. Sugar may well see the beginning of a major bull run in the next few weeks, months or years. If that happens then I will try and trade it.  Nothing is a given and the market does not always react based on logic. I understand your point about more affluent people needing more of everything but this simply cannot be used to make an investment decision on Sugar as the fundamentals and dynamics have changed. The affluent want to live a more healthier lifestyle. They want to reduce their sugar intake. Diabetes is on the up not just in the UK but around the world. Sugar consumption has changed from historical trends to current trends. It is more about Matcha, fresh cold pressed juices, etc. 

You post an interesting statistic on Chinese poverty from 1990 and 2015 from the World Bank. I have not done this but what would be an interesting exercise if anyone had the time is to see how the price of Sugar behaved during this period of Chinese poverty declining. There has been a significant decline in Chinese poverty and did that in any way influence the price of Sugar due to supply and demand fundamentals?

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@TrendFollower,  yes no one is going to be right all the time but looking at the monthly chart Rogers was right to call the market cycle low 10 years ago because price was at the market cycle lows of around 300 in Jan 2009 (about where it is now) then jumped to 700 by Feb 2010.

The China statistic is very important because decreasing poverty figures are being duplicated (though not as fast) around the world such as in Africa and India but it's important to point out the figures are for people being lifted out of extreme poverty where they were able to buy nothing at all, into just plain poverty where the are only just starting to become consumers, so a way to go yet but hopefully the trend will continue at this very fast pace.

The price of something does not just depend on demand but rather supply and demand, if the two are balanced then price will not rise. Suppliers typically over supply then under supply as they try to get the balance right but are always a step behind and this creates the market cycle. If sugar is at historical lows then one must assume it's at the bottom of a natural market cycle so therefore Roger's buy recommendation makes good sense even without factoring an increasing number of consumers..

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@Caseynotes,

You make a very interesting point in your third paragraph about supply and demand. I totally agree and you have hit the nail on the head. If the two are balanced then the price will not rise or drop significantly. It is the distortion between supply and demand and market inefficiencies that create the significant price moves in Commodities. 

Now Rogers may be right on this occasion and that Sugar is at the bottom of the market cycle. I simply do not know. What I do know is that I am monitoring the price action for Sugar so should any breakout occur or uptrend develop then I will share on this thread. There may well be an opportunity that happens rarely on Sugar so one must start by observing the price (for as long as it takes) and take it from there. 

I think time will tell if Rogers' buy recommendation makes good sense. I shall keep an open mind and let the price narrative show me the answer. 

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The disconnect between New York and London Sugar prices continues. 

It will be interesting to see if New York is taking the lead and whether London Sugar prices follow. 

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I wonder if there are any 'hybrid value speculators' on the IG Community who would consider going long on Sugar London No.5 around now?

I personally would not until a trend was established and confirmed but for those with a higher risk tolerance and who like to conduct speculative trades then I wonder if it would interest anyone? It seems there are far better trading opportunities out there than this specific commodity. Even if this confirmed a trend there is still no guarantee I would trade it. Especially if there were better trending opportunities than this.

Is anyone from the IG Community trading Sugar either long or short? 

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@Caseynotes,

WOW, 85% of IG clients are long! I suppose this ties in with 81% of retail clients losing money statistic. 

To me it seems like Sugar London No.5 may look to test the 3rd January 2019 low of around $326. If it can hold and stay above that price then we may witness a double bottom before any serious upward trend can even materialise. 

I actually invest in SARASIN FOOD AND AGRICULTURE OPPORTUNITIES fund and have for many years. For someone who wanted to invest in Sugar I can understand investing directly into a Sugar producer, Sugar distributor, Sugar wholesaler, etc. When one trades Sugar (Commodity) via a spread bet or CFD then one is merely betting / speculating on the price movement. 

The other thing I was thinking was that say if there were only five clients who had an open position on Sugar and four of them were long and one of them were short then though 85% sounds like a lot but it may only be four to five traders which gives a false indication of sentiment. The other thing I was thinking was that I am sure @JamesIG stated that the sentiment figure changes as it is how many positions are opened on that particular day. So 85% went long today. Again this could only be four to five traders as we do not have the data or statistics to see the significance of the sentiment.

Very interesting though. For me right now the key price is the 3rd Jan low and if that holds. 

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For clarity, the sentiment gets updated every 15 minutes or so, and related to the net set of positions our client base have at that time (not the amount of open interest in that asset over the day). 

For example, out of 100 clients, if 85 were long and 15 short, the sentiment would be 85%. Someone with a neutral positions (force open long and short) would have no impact. Over the course of 24 hours, if a trader went from short to long, then the sentiment would change to 86% long (i.e. net direction of client trades, rather than those who have traded in that day). 

This is a case of 'one man one vote'. Someone who is £100/pt long has the same weighting as someone who is £1/pt long. Hope this clarifies :)

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Posted (edited)

India is a large player in the world Sugar market. It is only second to Brazil in terms of the largest producer in the world. 

This recent article from Reuters is of particular relevance to this thread.

Government to crack down on sugar sales below floor price: document

https://in.reuters.com/article/india-sugar/government-to-crack-down-on-sugar-sales-below-floor-price-document-idINKCN1R817C

Edited by TrendFollower

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No 11in NY looking like an area of support right now and looking to make a move. 

741026765_NYSugarNo.11_20190330_13_02.png.391d757f23af1799e7894ac319be7a1b.png

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@cryptotrader,

In which direction do you think Sugar - New York No.11 is looking to make a move? Upwards or downwards? From the chart it is hard to conclude. 

Sugar - London No.5 is looking like it may head downwards as this seems to be the current direction though the destination is unknown.

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I thought this article was rather relevant to this thread. 

EU sugar rises as regional market tightens, world prices languish

https://www.independent.ie/business/farming/tillage/eu-sugar-rises-as-regional-market-tightens-world-prices-languish-37992854.html

The last paragraph in the article is rather interesting from a 'Fundamental Perspective'. 

Analysts expect the global sugar market to record a deficit of 1.9 million tonnes in 2019/20, but following years of surplus, stockpiles are plentiful, keeping prices stubbornly range-bound near decade lows.

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I am still struggling to find a significant driver of Sugar prices for any potential long trade at the moment. Also from an investment perspective I feel that if prices were to decline further to the oversupply issue then there could be a lower and better entry point going forwards.

1630527984_LondonSugarNo.5_20190422_19_24.png.0fbce52b4c72ac8f9f2583eae9fa9236.png

As you can see from the chart above (daily) that in the month of April 2019 the price action has been very choppy and in my opinion rather tricky to trade. From a trend following perspective it is not a trade that I would consider right now to enter either on the long side or short.

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Is there anyone on the IG Community that is either 'Long' Sugar or 'Short' Sugar?

It can be either New York or London. 

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