Sugar Market Report

Good morning,

Friday saw prices drop further after the big collapse the previous day. However, prices managed to claw back most of the losses by settlement as the market attempted to consolidate. The market had opened 4-5 points weaker before quickly dropping lower on some follow-through selling after the poor close on Thursday. Some light support was found at 14 cents but prices did probe lower just after mid-day but there was limited additional selling triggered and it was not long before prices started to recover. Values slow improved throughout the rest of the session finally pushing into the plus column in the 5 minutes after settlement. The trading volume was rather better than of late as good end-user buying was noted below 14.50. Much of the selling was seen as position trimming by the funds. The HK regained 6 points to end at +97 while the KN slipped 3 points to close at +57. In London the Z-20 improved against the rest of the board at expiry approaches. The ZH improved over $3.5 to end at -0.60. The HK was also nearly $1 stronger at +5.40. This saw the ZH WP improve by nearly $4 to end at 73.90 while the HH WP also improved slightly to finish at 74.50. At one point on Friday the market did look particularly vulnerable to a larger decline but the fund selling was limited with end-users taking the opportunity to price which eventually stabilised the market.

The Indian Government’s Food and Commerce Minister Piyush Goyal said on Friday that the government is, currently, not considering and extension of the sugar export subsidies for the 2020/21 season. He went on to say that a Sugar export subsidy is, currently, not under consideration because international prices are stable. However, rather tellingly, he said that, if there is any requirement, the Government will examine it at an appropriate time. It would appear traders do not believe the minister and some sort of export subsidy will be announced during the second half of this month. It is likely the actual subsidy will be lower than for the last two seasons but India will need to export at least 5-6 million tonnes during the current season to keep domestic prices above the cost of production especially as sugar production during the harvest which is just starting is expected to be close to a record amount of over 32 million tonnes.

The COT report as of the 27^th October showed that the funds/specs had increased their net long position by 10,604 to 262,579. The non-commercials increased their net longs by 10,774 to 211,334 with a gross long position of just shy of 250k lots which is just over 20% of the entire open interest and 55% of the H-21 Open Interest where the majority of the longs are held. The commercials increased their net shorts by 15,868 to 535,695 as producer selling was noted along with some light end-user and trade pricing. The Index funds increased their net long position by 5,265 to 273,116.

This morning the market opened 12 points weaker before swiftly improving. Currently prices have dragged themselves back to unchanged where they, currently, remain. The HK is a couple of points weaker at +95 while the KN is unchanged at +57. In London the ZH is a tad weaker at -0.80 and the HK also slightly weaker at +5.10. This morning’s opening suggests that the market does not believe the Indian government will do nothing regarding subsidies and it is only a matter of time before an announcement is made. This morning the macro is mixed with equity markets firmer while crude is lower along with most other commodity markets. The USD is higher again with the USD index hitting its highest level since 27^th September. The BRL ended the week at 5.74 close to its weakest level since May. The market seems to have weathered the immediate macro storm and further consolidation would seem likely today with prices looking to improve back to above 14.50.

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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