Market Commentary

27/08/19: Sugar Market Morning Report

Good morning,

With London closed yesterday for the late summer bank holiday NY was even more subdued than it has been of late with prices remaining caught within the range of the two previous sessions. The market opened a couple of points weaker before dropping another 4 points to register the low of the day in the first couple of minutes of trading. The weakness of the BRL was the main reason for the early weakness. Prices soon recovered swiftly moving into the plus column. With limited selling above the market prices continued to improve hitting the highs of the day only 90 minutes after hitting lows. However, the buying seemed to dry up as quickly as it appeared with prices dropping back to un-changed nearly as quickly as they had rallied. Indeed prices were back to unchanged by mid-afternoon. They then remained a couple points either side of unchanged through to the close. The VH ended, unsurprisingly, unchanged at -1.05 while the HK was 1 point better at -11. On Friday in London the VZ was a tad firmer at -9.60 while the ZH was also firmer ending at -9.70. Yesterday shortened session was unremarkable with limited interest from traders with the bulk of the volume generated by the HF and algo traders. Prices have been trapped within a narrow 28 point range for the past six sessions as the market awaits fresh news out of India regarding the government’s export programme for 2019/20.

The COT, as of the 20th August, saw the funds/specs increase their net short position by 10,660 to 163,643. This increase was expected with prices falling 35 points during the reporting period. However, the limited increase by the funds (6,252 lots to 173,903 lots) suggests they are nearing their limit and possibly see the downside as limited enough not to warrant selling any more. However, they will be aware the producers remain very poorly covered. The commercials cut their net short position by 9,032 to just 50,396. To put this in some perspective this time last year the commercials were just over 76k lots net short. In August 2016, when prices were above 20 cents, the commercials were over 500k lots net short. The Index funds increased their net long position by 1,627 to 214,038.

On Friday last week Unica released their harvest data for the first half of August. It showed that 42.54 million tonnes of cane was crushed producing 2.13 million tonnes of sugar. The sugar/ethanol split was actually slight better than the same period last year but still only 35.87/64.13. However, these figures were widely anticipated and had limited impact on prices. Cumulative sugar production for the season is now up to 15.45 million tonnes still some 6.34% lower than the same time last season suggesting that getting to last season’s total of 26.5 million tonnes for the CS could be a struggle.

This morning the market opened unchanged before improving a tad. Currently the range after 45 minutes has been a mere 4 points. The VH is 1 point weaker at -1.06 while the HK is unchanged at -11. In London the VZ is a little weaker at -9.80 as is the ZH at -10.00. This puts the VV WP slightly firmer at 58.00 while the ZH WP is also a tad stronger at 44.50. It is difficult to see the market do much more than remain range bound at the moment. The BRL remains weak (at its lowest level against the US dollar since September last year). Brazilian President Bolsonaro’s rather slow and limited response to the Amazon forest fires has not helped the situation. A quick improvement in the currency does not look likely in the short term. While it should not pressurise prices it is likely to lower the selling ceiling. Support seen at 11.37 (double bottom) then 11.27 (recent low) then 11.16 (lower BB). Resistance seen at 11.51 (10 day ma) then 11.64/65 (double top) then 11.65 (mid BB) then 11.96 (recent high) then 12.13 (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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