Sugar Market Report for 15 August

Good morning,

Friday saw the market hit a three week high as the funds continued to cover shorts. However, it was a quiet day with just 69.9k lots traded. The market had opened unchanged before swiftly spiking another 9 points higher before immediately dropping back to opening level in the space of five minutes. The market sagged lower to hit the day’s lows mid-morning but as US traders got to their desk values started to improve pushing up to their highest level since 21st July. Settlement was near the highs although the market gained another 5 points during the post-settlement period. As expected the VH managed to settle at a premium, albeit by 1 point, for the first time this year suggesting tightening physical market for the 4th quarter this year. The HK ended unchanged at +65. In London the VZ ended virtually unchanged at +27.10 while the ZH was firmer at +17.10. The WP improved again with the VV WP ending at 150.00 while the VZ WP settled at 122.90. Fund short covering was, again, the dominant feature on a generally quiet market. The market settled 140 points off the one year lows hit on the 1st August after the funds built their largest net short position for over 2 years. Fundamental news is sparse at the moment although analysts are increasing their final sugar production level for Brazil’s CS while cutting prospects for EU.

The COT report as of the 9th August showed their funds/specs had slightly increased their net shorts by just 169 to 65,811. The non-commercials increased their net shorts by 4,121 to 71,509. Although prices improved by 45 points during the reporting period the funds were still net sellers during the early part of the week. Since the report they have started to cover and maybe around 40k net short at the moment. The commercials cut their net short position by 2,021 to 118,219 as further end-user pricing was noted while some fresh trade selling also seen. The Index funds cut their net short position by 1,852 to 184,030.

On Friday the USDA increased its estimate for US sugar supplies after reporting higher than expected imports and better domestic production. The USDA see a total supply for the 2022/23 season that starts on 1st October at 14.48 million short tonnes and increase of 250k tonnes from their last estimate in July. US production was increased by 200k short tonnes due to better beet yields which appear to have recovered from the dry conditions experienced earlier in the growing season.

This morning the market opened 4 points lower mainly on a weaker macro picture. However, they have quickly recovered and are currently, 6 points firmer and making new highs for the recent move off the lows. The VH is 3 points better at +4 while the HK is 2 points firmer at +67. In early London trading the VZ and ZH are virtually unchanged at +27.90 and +17.00. As mentioned the macro is a negative picture this morning with most commodities trending lower while the USD Index is firmer mainly on disappointing Chinese economic data. The BRL improved against the USD on Friday ending at 5.07. Despite the bearish macro the sugar market looks likely to remain firm and may well push higher as the funds continue to cover. There is limited selling above the market. Brazilian mills will look to prices but will be very much on a scale up basis. While the Indian government is yet to give any indication on their export programme for next season mills cannot commit to any sales although current prices are below their break-even.

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.

 © 2022 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.

© 2021 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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