Sugar Market Report for 4 May

Good morning,

The market dropped again yesterday making a new lows and now some 185 points off the highs hit just three weeks ago. The market had opened unchanged before improving slightly to post the highs of the day as prices swiftly retreated into the negative column where they remained for the rest of the session. Some support was noted around 18.75 but, eventually, this gave way with prices dropping to the lows of the day shortly before the close with good support seen just below 18.60. The NV slipped 2 points to settle at -16 its lowest level since 9th March. The VH also dropped 2 points to -32 again its lowest level since early March. In London it was a case of catch-up being closed the previous session when NY dropped 30 points. The QV finished lower at +8.90 while the VZ was also lower at 2.30. However, the WP held its ground with the VV WP ending at 96.00 while the VZ finished at 93.80. The macro did recover slightly yesterday after the weakness of the previous session. However, sugar continued to weaken as funds exited longs and limited buying was seen. However, there was some signs of more concentrated buying below 18.60 as end-users start to price.

The market has now dropped nearly 9% since hitting their highest level since November last year. The funds that bought to take prices to the high have been liquidating positions and are, probably, currently around 80k lots net long the same position held at the beginning of April. At the time the strength of the BRL and high crude prices suggested that Brazilian mills would use more cane for ethanol production in 2022/23. Since then the BRL has weakened somewhat against the USD and a more reasoned view is that the split will be around the same level as last season (45/55). However, it is by no means certain this will happen and with a late start to the CS harvest much can happen over the next few months. Nevertheless, the Indian harvest continues and looks likely to stretch into June which may mean the expected 35 million tonne production could be exceeded adding to their export potential.

This morning the market opened 8 points firmer mainly on the back of a stronger crude market (currently up 2.6%) but soon fell back. Currently, prices are 3-4 higher. The NV is 1 point firmer at -15 while the VH is unchanged at -32. In early London trading the QV and VZ are both a tad firmer at +9.10 and +2.40 respectively. While crude is firmer the overall macro picture is slightly negative with grains/soya slightly lower while the USD Index is slightly firmer and back near multi-year highs. The sugar market continues looks likely to remain under pressure although support appears to be building below 18.60 as end-users look to price. One could argue that the  expected small global production surplus for this season and next would mean lower prices but, until a clearer picture emerges from Brazil and their CS harvest a price premium will remain. Baring a huge turnaround in the macro the up-side looks limited in the short term. Needless to say a weather issue could swiftly change the situation

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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