Sugar Market Report

Good morning,

The market sagged again on Friday despite renewed chatter about Indian export policy being discussed again. The market had opened unchanged but soon slipped lower losing another 15 points where some light support was found. This was enough to see prices improve to get back into the plus column but it was short lived with another bout of fund selling taking prices down to the lows of the day just after mid-day. Again once some support was found prices bounced on day-trader buying but, as seen earlier, there was little desire to drive prices convincingly through unchanged and values soon sagged again over the latter part of the session to close just off the lows of the day and looking rather tired. The HK weakened again losing 4 points to settle at +65 while the KN also weakened dropping 6 points to end at +37. In London it was more of the same with the HK dropping $1.5 to settle at +4.50 while the HQ also slipped ending at +5.00. this saw the HH WP drop to 77.70 while the KK WP was virtually unchanged at 87.70. Another uninspiring day with limited volume as commercial traders left the market to the day-specs. Even chatter that the Indian Food minister was going to discuss the export subsidy conundrum with a view to be presenting to the full Cabinet met with limited interest. There has been so many rumours over the past few months that it would appear only official news will have any impact.

The COT report for the 8^th December saw the funds/specs cut their net long position by 7,493 to 212,680 which was probably most as expected given the market was particularly quiet dropping just 12 points during the reporting period. The non-commercials cut the net longs by 11,625 to 164,705 as they continue to trim their positions. The commercials also cut their net shorts by 8,258 to 489,866 as the trade cut shorts but in limited action. The Index funds cut their net longs by 765 to 277,186. The trading volume during the reporting period remained very low with just the continuing slow erosion of fund longs. They are also cutting longs across the agricultural commodity spectrum.

The Egyptian state buyer ESIIC announced on Saturday they were holding a tender for 50k tonnes of Brazilian raw sugar with offer end date of 19^th December. It would appear that while there remains a ban of sugar imports to protect local producers exceptions are being made if approved by the Ministry of Supply and demand.

Russian farmers will endeavour to increase their beet planted area next season by just under 14% the Ministry of Agriculture announced Friday to 1.05 million hectares. This would seem more of a wish after President Putin criticised officials for a rise in basic food prices. The weather is likely to determine whether the increase in planting is seen or not.

This morning the market opened unchanged before dropping 13 points to 14.30 on some light market selling. Prices, currently, remain around 7-8 points lower. The HK and KN are a couple of points weaker at +63 and +35 respectively. In early London trading the HK and KQ are a tad firmer at +4.30 and +5.20 respectively. The macro is positive this morning with USD lower and back down to the lows seen earlier last week. Most commodities are trending slightly higher as a result. Again, sugar does not seem to being influenced by the macro at the moment. The weak end to the week seems to have triggered some early selling and it looks likely prices could slip lower with 14 cents the next target and then the low seen on the 30^th October at 13.94. However, low trading volumes is likely to increase volatility so a bounce cannot be ruled out but it is unlikely to be substantial unless some fresh bullish fundamental new emerges.

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.