Weekly Sugar Wrap
Written by Howard Jenkins, Head of Global Commodities, ADM Investor Services International Limited
The week has seen prices continue to improve hitting their highest level for eight months yesterday. Last time prices were at current levels back in February the market was starting its Covid triggered collapse which saw prices shed over five cents over the next two months. Since the end of April prices have slowly but surely improved on a mixture of improving fundamentals and investment money flowing into agri-commodities as the funds take a more risk-off attitude having decided that food is probably a better bet than most other asset classes. Nevertheless, commercial traders remain very wary of the global uncertainty being caused by the pandemic and remain very cautious trading on a need to do basis.
The main driver for the recent six-week rally from under 12 cents to the current, just shy of, 15 cent level is the continuing silence from the Indian government regarding the export subsidy policy for the current season. It was suggested yesterday that due to up-coming elections in India no official decision is likely to be forthcoming until mid-November. Chatter from Indian traders is that the recent improvement in world prices may see the Government lessen the size of the subsidy. The Government are likely to be aware that while, for the past two seasons India exports have had to compete with ample supplies from other producers, this season India exports are needed to make up for a drop in production elsewhere and, predominantly, Thailand.
A month ago traders were talking prices higher on the back of the dry weather across Brazil’s CS – since then there has been a marked change in the weather. Soaking rains have been received across most cane states and there is more to come over the next 10 days. While this will impact on the current harvest with the ATR dropping it bodes well for next season’s cane crop. However, it would seem Indian subsidies trumps Brazilian rains at the moment.
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