Sugar Market Report

Good morning,

Yesterday was essentially an inside day with prices ending unchanged for the front month as the HK weakened again. The market had opened 4 points firmer but soon dropped on some early market follow-through selling following the previous day’s weak close. However, prices soon recovered and then remained either side of unchanged or the remainder of the morning. Mid-day saw prices drop to the lows of the previous session before a bout of aggressive buying saw prices improve 40 points in under 30 minutes to hit the highs of the day. The move was exaggerated with a lack of resting sell orders above the market. Once the buying subsided so did prices slowly falling back to unchanged by settlement. The HK lost another 14 points to end at +55 now nearly 100 points off the highs reached a couple of weeks ago. The KN also lost ground ending 4 points lower at +47. There would appear to be a growing view that the physical tightness predicted for early next year may not be as pronounced as feared with sluggish demand. In London the HK also slipped ending nearly $2 weaker at +5.00 while the KQ also dropped ending at +5.40. This put the HH WP unchanged at 78.90 while the KK WP ended weaker at 86.10. The fear of some that the funds would continue to liquidate longs as seen the previous session appeared to be unfounded with good support noted below 14.40. However, despite the early afternoon jump the gains were not sustained with prices slipping back by the close. However, the inside day will have been seen as relatively positive.

Brazil exported 3.10 million tonnes of sugar during November. This is over 60% more than the 1.94 million tonnes exported in November 2019 but hardly surprising given the CS has produced over 11.5 million tonnes more sugar so far this season compared with last.

There was much discussion yesterday about the reason for the sell-off seen on Monday. While it was apparent that fund liquidation was noted some point to better cane prospects in Thailand as the trigger. One report suggested that the recent heavy rains may have boosted cane prospects to over 90 million tonnes. This does seem to be very far-fetched with most analysts seeing little possibility of total cane availability reaching 70 million tonnes. However, while 90 plus million tonnes might be implausible it could mean the cane has benefited rather more for the rains than expected. Time will tell but cane does have a remarkable ability to quickly recover from poor growing conditions so early production estimates are likely to improve over the coming weeks.

This morning the market opened 12 points firmer on some market on opening buying. However, prices immediately dropping back to unchanged within the first 20 minutes of the session. The volume so far has been minimal adding to the early volatility. The HK and KN are both 1 point firmer at +56 and +48 respectively. In early trading in London it is also very quiet with both HK and KQ unchanged. The market seems to be trying to settle into a new trading range having failed to break above the recent highs despite several attempts and is now back within the range seen for most of October. The macro is mixed this morning with most commodities little changed. The USD index continues to weaken. It is now at its lowest level since May 2018. The BRL has benefited for the USD weakness improving to end at 5.23 last night. The market continues to remain nervous with many traders still taking a cautious view. This may mean prices remain range bound but the volatility is likely to remain relatively high

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

Registered in England No. 2547805 a subsidiary of Archer Daniels Midland Company. Risk Warning: Investments in Equities, CFDs, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value, investors should therefore be aware that they may not realise the initial amount invested, and indeed may incur additional liabilities. These Investments may entail above average financial risk of loss, and investors should therefore carefully consider whether their financial circumstances and investment experience permit them to invest and, if necessary, seek the advice of an independent Financial Advisor. Some services described are not available to certain customers due to regulatory constraints either in the United Kingdom or elsewhere.