Sugar Market Report for 15 July

Good morning,

The market consolidated yesterday with an inside day and ended lower on a day the USD index hit its highest level since September 2002. The market had opened unchanged before slipping back. The market did improve mid-morning but was unable to break above the highs of the previous session thereby leaving a double top at 19.19/19.20. Prices soon started to slid as the macro deteriorated culminating in hitting the day’s lows mid-afternoon. However, the liquidation soon dried up and prices recovered slightly to settle in the middle of the day’s range. The VH dropped 3 points to -15 while the HK ended a couple of points weaker at +75. London remained very firm with the Q-22 settling at its highest level. The QV improved again to end at +44.50. The OI dropped to 6,397 lots with another 2,316 lots traded yesterday. The VZ also improved to end at +25.90. This meant the WP also improved with the VV WP finishing at 129.60 and the VZ at 103.70. Given the very weak macro the losses in sugar were probably less than to be expected. The strength of London is, obviously, supportive as is the uncertainty over the fate of the Brazilian CS cane crop and what will be the final sugar production.

News that Brazil legislation approved by congress late yesterday which saw the reinstatement of tax advantage to biofuels compared with fossil fuels was released just before market close. The provision says that biofuels should enjoy lower taxes than fossil fuels for a period of 20 years. What short term impact it will have on fuel/ethanol prices at the pumps is unclear but probably not enough to raise ethanol parity considerably. The tax changes was part of a major spending package which is seen by some as irresponsible and may fan inflation and hit the BRL. President Bolsonaro is hoping the spending package will bolster his popularity ahead of the Presidential vote in October. Currently Bolsonaro trails former President Lula da Silva in the opinion polls.

Stone X released their latest views on the sugar market yesterday. Looking at the next season they see Indian production at 36.5 million tonnes, Thai production at 11.5 million tonnes. They also see Brazilian CS sugar production at 33.3 million tonnes. Although they see EU plus UK production down 1 million tonnes compared with the current season at 16.4 million tonnes they see a global surplus for 2022/23 of 3.3 million tonnes. This is some 800k tonnes lower than their late estimate on the back of lower expected production from the US and Cuba. Nevertheless, their expectations are fairly bold with Indian production at another record level and Brazilian CS production 1.3 million tonnes more than last season and at the top end of most current estimates.

The weather phenomenon La Nina is likely to continue through 2022 with it decreasing into the northern hemisphere late summer before increasing through the northern hemisphere autumn and early winter 2022 the US government forecaster announced yesterday.

This morning the market opened unchanged before gaining 5 points. Currently, prices are back at unchanged. The VH and HK are unchanged at -15 and +75 respectively. In early London trading the QV sees a wide quote of +40.00 -+43.00. The VZ is around unchanged valued at +26.00. The macro is mixed this morning with crude and grans/soya barely changed. The USD index is slightly firmer but down from its 20 year high of 109.14 reached yesterday. The BRL ended weaker at 5.42 last night. The Q-22 expires today. Delivery looks likely to be around 250k tonnes with the possibility of Indian sugars in the tape again. Much will depend on the action in the front spread today which looks set to end very firm. Raws is being supported by the action in the whites at the moment and continues to be guided by the macro at the moment. Sugar still remains more attractive in Brazil than ethanol at the moment but this could change quickly which is probably stopping a more aggressive sell-off. The COT this evening may show the funds have bought back many of the shorts sold over the past couple of weeks.

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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