Weekly Sugar Wrap
Written by Howard Jenkins, Head of Global Commodities
It has to be said the market remains rather uninspiring at the moment with traders eying the upcoming holidays and the good riddance of 2020. The market has remained range-bound although a mid-week jump of nearly 60 points did spark some excitement. However, this was very short-lived with the market dropping back the next day. Sugar went from the best performing commodity on Wednesday to the worst yesterday which pretty much sums up the market at the moment.
There has been no particular fresh fundamental news. Unica’s data for the second half of November just confirmed that their harvest is coming to a rapid finish. It is thought that all mills will have finished crushing by the end of this month. It has been an unprecedented season. Total crush for the CS looks likely to push above 600 million tonnes with sugar production around 38.2 million tonnes and new record which might not be bettered for many years.
This morning there has been renewed chatter about Indian export subsidies. According to ‘sources’ the Food ministry may discuss the subject today. However, it all seems rather uncertain. Even if any proposal is agreed it would then have to make its way on to the full Cabinet’s agenda. As ever with Indian politics nothing is certain and this morning the market have not seen a flicker of interest with prices easing lower in thin volume so far suggesting no one is convinced any news will be forthcoming any time soon.
Regardless of sugar fundamentals there is renewed interest in all commodities as mentioned a couple of weeks ago. Some has gone as far as to suggest we might be at the start of a global commodity up-cycle which could continue for several years. Reasons cited are a continuing weakening USD, inflation caused by the huge global financial stimulus to counter the pandemic, La Nina and other weather issues caused by global warming and Chinese demand. Additionally, food prices are at, historically, low levels. Of course many a prediction has been made in the past with mixed outcomes. However, it would be ironic if a commodity bull market was to develop just as many traditional commodity banks exit.
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