Sugar Market Report for 2 September

Good morning,

The market ended in the plus column after two days of losses with London’s strength seemingly the main support for the improvement. The market had opened 3 points weaker and soon slipped lower soon hitting the lows of the day where some fairly solid support was found (17.75). This triggered a bout of short covering which saw the 18 cent level breached before more selling was found. Prices dropped back to the lows seen earlier before prices pushed up to the earlier highs late in the session posting a new high of the day before slipping slightly on the close. The strengthening of the structure was probably more as a consequence of the flat price strength after the VH dropped to +7 earlier in the session before recovering to +17 by the close 5 points firmer on the day. The HK also improved after hitting two month lows the previous session to settle 5 points firmer at +57. In London the spot month saw some aggressive early short covering which saw the VZ improve to +40.00 before falling back to end in the middle of the day’s range at +33.90. The ZH was also stronger at +21.90. This meant the VV WP improved again ending at a new high of 162.50 while the VZ was also firmer at 128.60. The macro remained under pressure with crude falling again and there was no particular bullish news for raw sugar but the strength in London was certainly supportive.

Indian Government officials have confirmed that the export policy for the soon to start 2022/23 season will be announced soon. A total of 7-8 million tonnes will be allowed. As expected it will be in two tranches with an initial 4-5 million tonnes in the first and the rest later in the season when the progress of the next crop has been assessed and review of domestic prices. The official announcement is expected sometime this month. The amount allowed for the second tranche will be all dependant on the domestic price which the Government will be keen to keep stable. It is a delicate balancing act keeping prices at a level that allows the mills to pay farmers but not too high so as domestic prices spike.

Petrobras announced yesterday that they are, yet again, cutting refinery gate price of gasoline by 7% starting today. This will, effectively, lower the ethanol parity yet again and ensure the mills continue to concentrate on sugar production. As has been the case for a couple of months it is now down to the amount of cane, yields and sugar content as to how much sugar will be produced by the end of the season. Most analysts are now pencilling in 33 million tonnes if not a little higher. Brazil exported 3.04 million tonnes of sugar during August 16 % more than the 2.55 million tonnes in August 2021.

This morning the market opened 7 points firmer before immediately improving another 20 points on aggressive buying. Currently, prices are 20 points firmer. The Structure has also improved with the VH up 4 points firmer at +21 while the HK is also firmer at +62. In early London trading the VZ is a tad weaker at +33.70 while the ZH is a little firmer at +22.20. This morning the macro is positive after several days of negativity. Crude is 2.5% higher while grains/soya are higher while the USD Index is lower after hitting fresh 20 year highs yesterday (109.98). The BRL settled weaker again yesterday at 5.243. There appears to be little reason for the early buying seen in NY apart from a relatively good close yesterday which may have triggered some short covering. While prices could improve further on short covering and limited scale up selling resting above the market any significant rally would seem unlikely from a fundamental basis. Nevertheless, the strength in white sugar is showing no sign of easing and this may impact on raw prices although has had limited impact recently.

NY Sugar will be closed on Monday for the US Labor Day holiday. London will open at normal time but close 1 hour earlier.

Contact the ADMISI Sugar Desk team:

Phone: +44(0) 20 7716 8598

Email: admisi.sugar@admisi.com

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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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