Sugar Market Report

Good morning,

Yesterday saw prices drop back after hitting its highest level since 26^th August in early trading. The market had opened 3 points firmer before swiftly dropping 10 points on some light speculative selling due mainly to a poor early macro picture. However, prices soon improved hitting the highs of the day after about an hour of the opening. The market then quietened and traded within a narrow 10 point range until the early afternoon. Although another attempt was made to improve the earlier highs as US traders got to their desks it was rather half-hearted as the macro started to seriously deteriorate. Eventually, this impacted on prices as they soon slipping lower losing over 30 points before some support was found at around 12.50. The lows for the day were seen shortly after but prices managed to settle virtually 10 points off the lows despite the macro taking other markets considerably lower. The VH ended 3 points stronger at -58 while the HK was 4 points better at +17 which does suggest much of the flat price weakness was purely speculator inspired. In London things were rather quieter with the ZH ended a tad weaker at -0.60 and the HK at -3.20. This put the ZH WP virtually unchanged at 77.30 and the HH WP at 77.90. The recent 110 point rally did not seem to be built on any serious shift in the fundamental picture so was always likely to be vulnerable to a change in the macro picture. With crude and equities taking a serious tumble due to increasing concerns that the second wave of Covid case is increasing across Europe and elsewhere suggesting that the lock-down rules of April – June could be re-instated. The USD improved as investors took risk off with the USD index hitting its best level since 12^th August. The economic damage that this would cause on an already very fragile global economy has, unsurprisingly, sent financial markets lower.

The Maharashtra Sugar Commissionerate said yesterday that they see a bumper cane crop in Maharashtra for 2020/21 due to good weather and an increased planted area of nearly 30% from last season. The harvest is expected to start a little earlier than usual due to excess cane. Productivity is expected to also improve by some 5-10 tonnes per hectare. There has been some concerns over the availability of cane cutters due to the pandemic. Several mills have set up Covid centres for workers. Additional bed facilities have also been put in place. Therefore, assuming the end of the monsoon season is not as dramatic as last year’s with devastating flooding in several states then sugar production could well be at the top end of current estimates of around 33 million tonnes.

Tereos has estimated that French sugar beet yields will fall about 12 % from last year’s levels due to disease affecting some growing regions. Aphid-borne jaundice disease has spread due to warm weather and the inability for farmers to spray with neonicotinoids which, have been banned since the beginning of this year. In the worst affected areas a drop of 30% in yields may be seen. Tereos have put back the start of their harvest in France in the regions hit by disease to the beginning of October.

This morning the market opened 4 points weaker but quickly rallied 16 points to hit a high of 12.68. Prices have slipped back 4 points where they currently remain. The VH and HK are unchanged at -57 and +17 respectively. In London it is a quiet start with the ZH unchanged at -0.70 while the HK is a tad firmer at -3.00. The macro is quieter this morning but there has, so far, been no meaningful improvement with only a marginal improvement in crude while the equity markets are around unchanged. Most other commodities are still a tad lower. The USD is firmer again after its big improvement yesterday. The BRL hit its lowest level against the USD since the end of August yesterday (due mainly to strength of USD) to end at 5.415 last night. While the macro remains volatile with pandemic uncertainly swirling around the global markets it is unlikely that sugar will be able to make any serious headway on the up-side especially as there is little fundamental justification. However, as demonstrated yesterday the down side looks well supported with end-user pricing and limited selling from the funds.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598

Email: admisi.sugar@admisi.com

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