Sugar Market Report for 22 August

Good morning,

Friday saw the market reversed most of the losses seen the previous session mainly on a bullish Conab report. The market had opened 1 point firmer before improving another 7 points before settling into a narrow 8 point range for the remainder of the morning. However, as US traders got to their desks, more selling appeared taking prices down to their lowest level for two weeks. Things quickly changed with the release of the latest Conab report which was viewed as bullish (see below) and prices quickly reversed direction and gained nearly 60 points over the next couple of hours although never bettered the previous day’s highs. Some late day trader liquidation saw the gains trimmed on the close. The VH improved to end at +5 while the HK was around unchanged at +64. In London the market was firmer again with the VZ reaching +31.20 while the ZH ended at +13.30 which meant the WP was firmer again with VV WP ending at 151.30 and the VZ WP at 120.10. The release of the Conab crop data abruptly stopped to sell-off seen over the past three previous session and probable stopped a close below 18 cents.

The Brazilian Government agency, Conab, released their latest CS crop data on Friday and surprised the majority of the industry. Just as analysts were pencilling in total production at 33 million tonnes Conab see the total CS cane crop at only 514 million tonnes producing just 30.7 million tonnes of sugar. They cite drier-than-normal weather and a reduction in planted area for the low cane estimate. Most analysts are still putting the total cane for the CS at between 545 and 560 million tonnes with sugar production at over last season’s total of 32 million tonnes. Conab are around 7% lower than most CS cane estimates and many will question whether this will turn out to be the case. Conab is often the lower end of estimates. In coffee they are often seen to be around 15% lower than other estimates so perhaps this maybe the case this year for sugar.

The COT report as of the 16th August showed that the funds/specs had cut their net short position by 40,070 to 25,741. This was probably inline with expectation as prices improved over 70 points during the reporting period most of which was seen as speculative short covering. The non-commercials cut their net short position by 33,833 to 37,676 after building their largest net short position for over two years the previous week. It was always likely they would cut shorts once a bottom was found as they do seem uncomfortable with a relatively large short position in current market conditions. The commercials increase for net short position by 40,070 to 158,288 as the trade liquidated longs and some light producer selling was noted as prices pushed above 18.50. The Index funds saw limited action with a net drop of just 1 to 184,029 in the net long position.

This morning the market opened 15 points weaker on a negative macro picture. Currently, prices are 16 points weaker. The VH is 2 points firmer at +7 while the HK is 2 points lower at +62. In early London trading the VZ is slightly weaker at +30.90 while the ZH is firmer at +14.00. As mentioned their macro is a negative picture this morning with crude, metals and grains/soya lower while the USD Index is firmer adding to the gains of last week and is now not too far from the 20 year highs hit in July. The Conab data is now in the market and whether one believes the CS cane from will be the smallest since 2011 or not it does seem most will be taking their predictions with a pinch of salt. Unica should release their harvest data for the first half of August sometime this week which will give a more up-to-date appraisal of the situation. Nevertheless, it would seem unlikely prices will drop back to the lows seen at the beginning of the month with the continuing uncertainty of the CS harvest. Perhaps some consolidation just below 18 cents will be seen?

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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