Sugar Market Report for 27 June

Good morning,

Friday saw prices drop to their lowest level since the beginning of March as traders continued to take a risk-off approach with a large fund sell-off seen across the commodity spectrum on weakening demand as global recession fears increase. The market had opened 1 point firmer but immediately fell 8 points. Prices did then briefly improve back to unchanged as the support just above 18.30 held. However, this improvement was fleeting as prices soon started to weaken again. This time the support was breached which triggered further speculative selling taking prices down to the day’s lows and near 4 month lows. The market eventually found some support just above 18.20 which triggered some day trader short covering which had prices improving back to unchanged by the close. The NV improved 4 points to +6 by the close as expiry looms on Thursday. The VH slipped 2 points to end at -28. In London the structure continues to weaken from its heady heights of the previous week. The QV slipped to +20.30 while the VZ also weakened to +15.40. This meant the WP also dropped with the VV WP ending at 119.60 and the VZ WP at 104.20. It was probably fairly inevitable that the triple bottom at 18.32/18.30 would eventually be tested again and breached given the weak macro. In the event there were no significant sell stops triggered and prices just sagged another 10 points as the fund selling became lighter and end-users taking advantage of the weakening market to prices.


The COT as of the 21st June showed that the funds/specs cut their net long position by 11,587 to 59,575 their smallest net long position since just before the Russian invasion of Ukraine. The non-commercials cut their net longs by just 2,141 to 40,678 during a week that prices slipped 10 points. The commercials cut their net shorts by 8,900 as the trade cut positions and end-users priced through the trade. The index funds increased their net long position by 2,686 to 243,324.


A combination of bearish factors have hit the market recently. A strong USD has weighed on commodities in general along with poor global economic outlook. In sugar the BRL has also weakened as further interest rate rises looking likely. The shenanigans between President Bolsonaro and Petrobras have not helped either. Despite chatter about further Indian export caps for next season the expectations are that another bumper production is on the cards. Another improvement in Thai cane production also bodes well for a further increase in sugar production. Currently, there seems limited concerns over the weather for major producers although that can quickly change. As major economies struggle with rising inflation there is a growing concern that the US and other large economies may fall into a recession dampening demand which could impact sugar.

 
This morning the market opened 3-4 points firmer before immediately improving another 11 points on some fairly aggressive market buying. However, once filled prices soon dropped back and, currently, are back at unchanged. The NV is stronger again at +9 while the VH is unchanged at -28. The OI in N-22 dropped to 56,827 lots as of COB 23rd June. Just under another 33k lots traded on Friday so it looks as if the delivery will be small. In early London trading the QV is firmer at +23.50 and the VZ is also stronger valued at +16.40. This morning the macro is mixed with crude barely changed while grains/soya are mixed and the USD Index is weaker. The BRL ended Friday at 5.283 its weakest level since February. It seems unlikely that prices will improve too much with the bearish macro back-ground. Nevertheless, the funds are possibly now around 30k lots net long so unlikely to be aggressive sellers at current levels. End-users still have pricing to be done although probably on a scale down basis. Therefore, it is likely the market may look to attempt to build a base around current levels. Unica are likely to release their 1st half June harvest data this week which will give some indication on whether there has been a change in the sugar/ethanol split which will be key to total production by the end of the season.

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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