Sugar Market Report

Good morning,

Prices improved on Friday on more chatter regarding the Indian export policy and a better macro picture. The market had opened 10 points lower before dropping further on light speculative liquidation. However, activity was limited for much of the morning with prices caught within a narrow range until early afternoon when some good fund buying appeared as US traders got to their desks. The market improved over 40 points rapidly with limited selling noted until prices pushed above 14.80. Prices did push higher hitting 15 cents mid-afternoon where the resistance was enough to stifle the advance. Prices remained near the highs through to the close as speculative buying met with trade and producer selling which boosted the volume to a half-decent level. The HK slipped 5 points to finish at +78 suggesting that much of the flat price buying was speculative in nature. The KN ended 4 points better at +70. In London the ZH ended $1 better at -3.10 with a week until the Z-20 expiry. The HK was virtually unchanged at +3.50. This put the ZH WP slightly firmer at 71.60 while the HH WP was unchanged at 74.70. The market managed to claw back much of the correction seen after the market hit the eight-month highs earlier in the week on a weaker USD and better BRL which hit its highest level against the USD since September finishing the week at 5.367. Continuing chatter regarding the Indian export policy (see below) also helped prices improve.

The COT as of the 3^rd November showed the funds/specs had cut their net long position by 17,206 to 245,373. The non-commercials trimmed their longs by 19,952 to 191,382. This was during a week that saw prices drop to below 14.00 cents before surging to 15.23 suggesting the funds are not too keen to extend their long position at current levels. The commercials cut their net short position by 16,761 to 518,933 as end-users priced on the drop back to below 14.00 cents while producer selling was rather more limited as they await higher prices. The Index funds increased their net longs by 445 to 273,561.

More chatter from India. Over the weekend the Indian Food Secretary Sudhanshu Pandey said that the government is reconsidering an extension of the sugar subsidies in place over the past two season. This follows However, while they will look to export up to 6 million tonnes it is likely the actual subsidy will be lower. Rumours on Friday suggested the subsidy would be less than half the amount last season. This follows the Food minister, Piyush Goyal’s assertions the previous week that the government is not considering an extension of the subsidies. All in all a confusing picture. However, with production likely to be above 30 million tonnes it would seem the government will have no option but the extend subsidies to stop a mammoth build-up of stocks by the end of the season. It would seem 6 million tonnes will be the export target only the extent of the payment is to be decided. Any announcement is likely within the next fortnight.

This morning the market opened 6 points firmer before quickly hitting Friday high (15 cents). However, the buying soon dried up with prices soon dropping back into the negative column. Currently prices are around 4-5 lower. The HK is 1 point weaker at +77 while the KN is 1 point firmer at +71. In London the ZH is slightly weaker at -3.50 while the HK is unchanged at +3.50. The Z-20 expires this Friday and, currently, it looks as if the delivery will be large at over 500k tonnes. Chatter is that Brazilian and Guatemalan whites will be delivered. Whether Indian is also delivered remains to be seen. As said many times before the Indian Government’s export policy will continue to occupy trader’s minds and decisions for the time being. This morning the macro is slightly positive with equities and crude firmer while the USD is around unchanged. The funds seem content with their long position so the market might remain within the range of late last week but the bias on the up-side.

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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