Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
Written by Howard Jenkins, Head of Global Commodities, ADM Investor Services International Limited
The past week has seen further price gains after their improvement from the six week lows the previous week. The continuing strength has been a slight surprise to many given the uncertain macro picture and chatter of possible record production by the two largest producers next season.
The macro has remained volatile as the Covid pandemic rears its ugly head to strike many countries with a second wave of infections. The USD which had few friends at the beginning of the month has seen its biggest weekly gain in almost six months as investors expect more Fed economic support.
So, with the USD strengthening (and BRL weakening) sugar strength must be based on bullish fundamentals? Well, perhaps…..It is dry in Brazil’s main cane regions which might impact on next year’s crop. However, it is helping propel their current harvest to a possible record sugar production. Most cane growers are not concerned – ‘see how things are by November’ is their view. The Indian monsoon is ending with excellent rains allowing record plantings of all crops. Cane planting are up by over 10% suggesting the prospect of record production. The government maybe dithering on next season’s export policy but, ultimately, will need the sugar shifted.
October raws expires next week. Currently, a largish delivery is on the cards with Brazil likely to be the biggest origin. The usual post-expiry debate on whether the size of the delivery is bullish or bearish will ensue enabling brokers to bulk out their reports but, ultimately, the receiver will be bullish while the deliverers will be bearish.
The NY market remains quiet despite the impending expiry suggesting traders remain very uncertain on many levels. Therefore, current levels might be seen as fair value – after all they spent most of 2019 at similar levels.
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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