Sugar Market Report for 1 December

Good morning,

The market dropped again yesterday as the threat of the new Omicron Covid variant continued to cause turmoil across all markets. Sugar prices fell to their lowest level for two months as heavy fund long liquidation was noted. The market had opened 7 points lower following the weak close their previous session. Prices did tick up a little over the next hour but as the macro started to deteriorated again after comments from drug maker Moderna that existing vaccines may not be too effective against the new Omicron variant sugar prices started to slid lower. Thereon in the market lost ground throughout the rest of the session culminating in the lows of the day being reached on the close. Fund long liquidation and fresh selling met with reasonable scale down buying as end destination priced. With flat price under pressure the structure weakened again with the HK slipping 7 points to end at +32 while the KN was 9 points weaker at +24. In London the HK dropped by $1 to end at +1.10 while the HQ ended over $1 weaker at +2.80. The HH WP improved slightly to finish at 75.60 while the KK WP was virtually unchanged at 81.50. It was another day when the macro took all the attention and the fundamentals were, for the most part, forgotten as the fear that the Omicron variant will send the world into lock-down again and, thereby, stifle demand again. It is very early days and little is known about this variant. The biggest fear is that existing vaccines will not be as effective as they are against other known variants. The biggest unknown is how it will impact on individuals. Early data seems mixed but might suggest the symptoms are milder than other variants. Until more information is gathered the markets will remain very nervous.

Published presumably before the new variant spooked the markets Rabobank reported that they expect raw sugar prices to average 20.80 cents in the third quarter of next year as the market sees another 2.3 million tonne production deficit for 2021/22 after a 1.2 million tonne deficit last season. The level is seemingly because above 20.80 Indian sugar will be profitable and their stocks may plug supply gaps. Stone X have increased their projected deficit for this season to 1.8 million tonnes up from 800k tonnes due to more cane being used to produce ethanol in India.

This morning the market opened 26 points higher in line with a more positive macro picture probably mainly on profit taking as there is limited fresh news regarding the Omicron variant. Currently prices are 16-17 points firmer. The HK is around unchanged at +33 while the KN is 2 points firmer at +26. In early London trading the HK is a tad firmer at +1.50 while the KQ is valued at +3.00. As mentioned the macro is positive with virtually all commodities higher. Crude is currently just under 4% higher while the USD index is slightly weaker. During this uncertain time it is difficult to gauge what the market will do next. From a fundamental basis the market is probably undervalued but many traders will be reluctant to make any significant decisions until a clearer picture emerges. In the mean time the market is likely to remain volatile with, probably, an upside bias.

Contact the ADMISI Sugar Desk team:

Phone: +44(0) 20 7716 8598

Email: admisi.sugar@admisi.com

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, 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 may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

 A subsidiary of Archer Daniels Midland Company.

 © 2021 ADM Investor Services International Limited.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, 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 may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2024 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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