Sugar Market Report for 8 July

Good morning,

Yesterday saw a large 3% correction in NY Sugar after hitting 4 month lows earlier in the week on positive macro with most commodities rallying. The market had opened 5-7 points firmer before dipping back to unchanged where decent support was found. This triggered some more persistent short covering which saw prices rally higher for the rest of the session with some fresh buying also noted. The highs of the day were hit shortly before settlement before closing back in the range of the previous week. The good flat price buying also buoyed the from spread which improved by 10 points to end at -15 its highest level since mid-May. The HK also improved 5 points to finish at +65 its strongest close since the end of May. In London it was a more subdued picture with prices only seeing limited gains. However, London had held steady when NY had collapsed so this was probably to be expected. The QV slipped nearly $4 to end at +19.80 while the VZ was also $2 weaker at +20.60. This meant the WP also weakened with the VV WP down over $5 at 123.60 – still a very decent level for refiners. The VZ WP dropped as well to finish at 103.00. A correction in prices was on the cards after the market lost nearly 80 points in just two sessions. However, as is often the case, few will have expected over 50 point rally. The strengthening of the structure also suggests traders are still ware of Brazilian CS production.  The macro was very positive with most markets improving as the fears of global recession is now seen to be priced into the markets – at least for the time being.

The Indian Government has announced they are extending the deadline for exports by a couple of weeks to 20th June so as the get around 800k tonnes of sugar exported. The annual monsoon rains have made if difficult for mills to move sugar to ports. ISMA is pleased with the announcement and believes the sugar will be exported before the new deadline. ISMA are also calling for the Government to allow another 1 million tonnes of sugar exports over and above the Government’s 10 million tonne cap. However, the total exports for the current season will probably exceed 10 million anyway. The monsoon is progressing well and next season another bumper  cane crop and sugar production is expected so a tightness in domestic stocks is not likely argues ISMA. There is also chatter that Indian mills are starting to offer raw sugar for Nov/Dec shipments and white sugar for Nov shipments. This would suggest they are confident that the Government will announce their export policy for next season well before the start in October.

This morning the market opened 3 points weaker and, currently, remain at these levels. The VH and HK are unchanged at -15 and +65 respectively. In early London trading both QV and VZ are slightly firmer at +20.30 and +20.90 respectively. The macro is a mixed picture this morning with crude slightly lower, grains/soya slightly higher. The USD index is also firmer and at another new 20 year high. The BRL ended slightly better last night against the USD at 5.34. The recent fall was all to do with the macro and recession fears with fundamentals taking a back seat. Now the initial sell-off appears to be behind us traders are now looking at the fundamental picture. Undoubtably, they have turned bearish recently with several factors meaning producing sugar from Brazilian cane, currently, is more attractive than ethanol. However, the amount of sugar produced will, ultimately, also be determined by the amount of cane available to crush. Traders are likely to be of the view that the potential for an up-side move is more likely than a collapse in prices from current levels.

 

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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