Market Commentary

20/08/19: Sugar Market Daily Report

It is nearly three weeks since the last report (due to annual leave). Back at the end of July it was looking hopeful that the market could break convincingly above 12.30 which would trigger a wave of fund short covering. Sadly, this was not to be with prices diving to their lowest level since early October last year. It would seem India continues to dominate the fundamentals. Good monsoon rains over the past few weeks after a slow start and continuing chatter that their government is looking to help export 6 million tonnes next season has kept prices under pressure. The huge deliveries against N-19 raws and Q-19 whites also continue to weigh heavily on the market.

Yesterday the market opened 4 points weaker before dropping another 10 points before finding some support. It would appear traders were expecting the funds to have increased their net short position rather more than the actual 3,551 lots as prices had collapsed by 46 points during the reporting period. While the funds did sell heavily as prices dived to multi-month lows it seems the shorter term funds covered shorts when prices rallied nearly 70 points off the lows. Nevertheless, traders will have also noted that the producers still remain badly under-priced with the commercial’s net short position a mere 59,428 lots. Most of the morning prices remained caught within a very narrow 4 point range until just after mid-day when a bout of speculative selling took prices down to the lows of the day as the BRL opened weaker again. The strength is crude did see prices improve shortly after US traders got to their desks but the improvement was short lived with prices easing back towards the lows where they remained through to the close. The VH ended a couple of points weaker at -1.07 while the HK ended unchanged at -14. In London the VZ was slightly weaker at -9.70 while the ZH was virtually unchanged at -10.80. A disappointing day for the bulls as the market failed to break above the 10 day ma for the seventh consecutive session. The market continues to expect an announcement from the Indian government that it will extend its export subsidy on exports for a further 12 months. Until their intentions are clear prices look set to remain under pressure.

India’s 2019 cumulative monsoon rainfall was 0.1% above the long-term average by August 14th, according to the India Meteorological Department in a statement released on Friday. About 84% of the country's area has received above-average rainfall and 16% has had deficient rain since the start of the 2019 monsoon season on June 1.

Rainfall over the country in the week of Aug. 8- 14 as a whole was 45% above the long period average, mainly due to large volumes of rain received over central India and south peninsular India.

In Belgium beet tests show poor sugar yields at the moment. The second beet test of the 2019/20 season conducted at Raffinerie Tirlemontoise on August 12th showed a beet yield similar to last season. However, the sugar content is much lower at 155kg per hectare.

This morning the market opened 4 points weaker before stabilising. Just a three point range seen so far in thin trading volume. The VH and HK are both unchanged at -1.07 and -14 respectively. In London the VZ is a tad weaker at -10.00 while the ZH is unchanged at -10.70. This puts the VV WP at 58.00 and the ZH WP at 44.20 only marginally higher than the level three weeks ago. As mentioned above there seems little reason for the market to improve anytime soon while the market awaits news from India. In the meantime the BRL continues to weaken and is now back at 4.07 it lowest level against the US dollar since May over 8% weaker than a month ago as their economy fails to improve. Support seen at 11.27 (recent low) then 11.26 (lower BB) then 11.03 – 10.48 (chart gap on 1st month continuous). Resistance seen at 11.57 (10 day ma) then 11.80 (mid BB) then 11.96 / 12.00 (August highs) then 12.30 (July high) then 12.33 (upper BB).


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

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