Market Commentary

06/06/19: Sugar Market Morning Comment

Good morning,

Yesterday saw a new one month high hit before a bout of fairly aggressive long liquidation saw prices settle 32 points off the highs. The market had opened unchanged before quietening into a narrow 7 point range for the next couple of hours. Values dipped mid-morning on some light liquidation as an apparently erroneous BRL quote suckered trad-ers into some long liquidation. However, as the BRL quote corrected sugar prices also recovered pushing up to the key psychological level of 12.50 where good producer selling was noted. There was an attempt to push the market higher but it was fairly lame and swiftly ended when the highs of the day were hit mid-afternoon. This coincided with the BRL sliding and a bout of aggressive liquidation took prices down 25 points in just under 15 minutes. The weakness continued through to the close with further profit taking and producer pricing taking prices down to the day’s lows shortly before settlement. The NV slipped 6 points to -28. The VH took a slightly larger tumble ending 8 points weaker at -91. In London the QV ended unchanged at -6.00 while the VZ ended at -8.60 having hit a two month higher earlier in the session of -7.10. Three consecutive settlements above the upper BB and the 9 day RSI pushing above 72 meant the market was technically oversold and a correction was likely especially as prices had rallied 93 points in just four sessions. The slight weakening of the BRL and continuing weakness in crude was enough to trigger the sell-off.

The long awaited and slightly delayed Indian monsoon rains are expected to arrive in a couple of days hitting Kerala on Friday about a week later than normal. The amount of rainfall over the next four months will be especially critical this year as the pre-monsoon rains have been virtually non-existent in many parts of India causing shortages of drinking water amid very hot temperatures. Key reservoirs in Western Indian are at around 11% of their overall storage capacity compared with 15% a year ago and the ten year average of 19%. The government forecasters are expecting an average amount of rainfall during the monsoon while a private forecaster, Skymet, see 93% of the long term aver-age. This would certainly be enough if the distribution is good. The progression of the monsoon can be particularly fickle and a better idea of the success of the monsoon will not be known for, at least, a couple of months.

The market opened virtually unchanged this morning but immediately dropped another 11 points in the first couple of seconds as market on opening selling met with limited buying. However, once this MOO selling was completed prices quickly bounced back into the plus column by a couple of points where they currently remain. The NV is 1 point better at -27 while the VH is unchanged at -91. In London the QV is better at -5.30 while the VZ is weaker at -9.30. This puts the QN WP firmer at 64.50 and the VV WP at 64.20. As mentioned above the market was due and needed a correction after rallying sharply. The next couple of day’s action will be critical to whether the correction was just that and prices will resume their climb or whether they will fall back to below 12 cents. Much will depend on the macro especially the BRL. Additionally, there is still a large amount of Thai pricing to be done against N-19. It would appear they only priced minimal amounts over the past couple of sessions and will have to start to lower their selling ideas in the next few days. This may well put a cap of prices (12.45?) for the time being and deter the funds from covering more shorts. Technical support seen at 11.98 (10 day ma) then 11.86 (mid BB) then 11.62/60 (double bottom) then 11.38 (lower BB). Resistance seen at 12.34 (upper BB) then 12.53 (yesterday’s and one month high) then 12.61 (100 day ma) then 12.75/76 (double top).

Contact the ADMISI Sugar Desk team: Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg
Phone: +44 2077168598 | Email:

ADM Investor Services International Limited is authorised and regulated by The Financial Conduct Authority Member of The London Stock Exchange. Registered office: 4th Floor Millennium Bridge House, 2 Lambeth Hill, London EC4V 3TT. Registered in England No. 2547805 a subsidiary of Archer Daniels Midland Company. Risk Warning: Investments in Equities, CFDs, 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 indeed may incur additional liabilities. These Investments may entail above average financial risk of loss, and investors should therefore carefully consider whether their financial circumstances and investment experience permit them to invest and, if necessary, seek the advice of an independent Financial Advisor. Some services described are not available to certain customers due to regulatory constraints either in the United Kingdom or elsewhere.