Sugar Market Report for 28 June

Good morning,

The market dropped again yesterday hitting a near 4 month low as Brazil’s Sao Paulo state cut taxes on gasoline but kept unchanged on ethanol. The market had opened 2 points firmer before immediately improving another 16 points on some good market on opening buying. However, this quickly proved to be the high of the day as prices quickly fell back to unchanged levels. The market did see prices improve again during the morning but volumes were limited and as US traders got to their desks prices slipped into the negative column swiftly hitting new lows for the move as news of the Brazilian fuel tax cuts filtered through. However, the selling soon dried up allowing prices to recover back to unchanged before some late selling ensured the market settled with small losses on the day. The NV dropped 2 points to end at +4. The N-22 OI dropped to 44,451 with another 25,700 lots traded yesterday suggesting the delivery will be relatively small with some estimating between 250k and 350k tonnes in the tape. The VH also dropped 2 points to end at -30. In London the structure continued to weaken slightly with the QV ending at +19.50 while the VZ was a tad lower at +15.10. The WP was barely changed with the VV WP at 119.50 and the VZ WP at 104.40. While a new low for the move was reached yesterday there did seem to be some attempt to start to build a base around the 18.20/18.30 level as end-user pricing was noted while fund selling was limited. The market has fallen just over 200 points in the past six weeks on a mixture of bearish fundamentals and macro. However, there is still much uncertainty in both so, for the time being the downside looks limited.

Unica will release their CS harvest data for the 1st half of June at 14:00 today (London time). This time last year a total of 35.95 million tonnes of cane were crushed producing 2.19 million tonnes of sugar with a 45.25/53.75 sugar/ethanol split. This year the crush and sugar production is expected to be higher at 41 million tonnes and 2.3 million tonnes although the split will remain below last year’s at 41.35/58.65. The second half of May data was better than expected which prompted a sell-off. This time expectations are higher but any large deviation from expectations is likely to trigger a price reaction.

Petrobras has a new CEO with Caio Paes de Andrade being elected CEO yesterday much to the delight of President Bolsonaro who said that the company will now have a “new dynamic” on fuel issues. On the same day Brazil’s Sao Paulo state government announced a reduction in the state’s ICMS tax on gasoline to 18% from 25%. They kept the tax at 13.3% for hydrous ethanol. The move is seen as reducing the price advantage of ethanol compared to gasoline in Brazil’s largest fuel market.

This morning the market opened 10 points firmer mainly on firmer crude prices and overall better macro picture. Prices have improved further since the opening and are, currently, 14 points higher. The NV and VH are 2 points firmer at +6 and -28 respectively. In early London trading the QV is a tad weaker at +19.30 while the VZ is weaker at +14.40. As mentioned the macro is more positive than of late with most commodities trending higher while the USD index is unchanged. However, the BRL remains near its weakest level since February ending at 5.238 last night. It does look as if the market will try to try to consolidate after the recent drop. A correction could be seen especially if Unica is seen as bullish.

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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