Market Commentary

18/09/19: Sugar Market Morning Report

Prices dropped back yesterday after the gains in oil were all but erased as WTI dropped below $60 per barrel. The market opened unchanged but soon improved gaining another 10 points to hit the day’s highs some 20 minutes after the opening. However, prices soon started to drop as news started to filter through that the drone attack damage to Saudi refineries over the weekend was not as bad as initially reported. The Kingdom’s energy minister said that the country’s oil production will be fully back on line by the end of this month. The market dropped through unchanged mid-morning before momentarily slipping into the negative column around mid-day. Good support was initially seen at the top of the chart gap formed the previous opening to encourage some speculative fresh buying which saw prices improve 25 points mid-afternoon. However, as the close approached, prices started to weaken again, not only hitting the day’s lows but also filling the chart gap (12.07-12.10). The VH was much quieter trading in a narrow 4 point range to close 1 point firmer at -116. The HK lost 6 points after improving the previous session on heavy fund short covering settling at -12 well within the range seen over the past two months. In London the ZH ended slightly firmer at -5.20 while the HK was also slightly firmer at -5.70. Yesterday’s market action was always likely to be determined by the oil price and not by sugar fundamentals which remain little changed. The oil price shock was seen as a catalyst to triggering a large fund short covering rally. There was certainly good fund buying on Monday but it seemed to peter out yesterday as pressure eased on oil prices. Nevertheless, the political tensions across the Middle East suggests the macro will remain volatile and another spike in oil prices cannot be ruled out. 

The Brazilian consultancy company Agroconsult reported yesterday that they expect Brazil’s CS cane crop to improve to just shy of 600 million tonnes in 2020/21 as good rains boost yields. However, they see sugar production basically flat for next season at 26.50 million tonnes as mills continue to allocate nearly two-thirds of their cane to ethanol production. They see limited scoop for an improvement in sugar prices with only a marginal improvement to around 12.80 by the second half of 2020.

In the UK a Farmer’s weekly report said that farmers may have access to sugar beet varieties resistant to virus yellows in 3-5 years. This would allow farmers to secure the viability of the crop without neonicotinoid seed treatments. Neonicotinoids were, controversially, banned last year from being used on sugar beet. This will be very welcome news to beet farmers as virus yellows disease can serious cut yields.

This morning the market opened 4 points weaker, at yesterday’s low and the bottom of the chart gap. Prices did momentarily improve 8 points but prices soon slipped back to opening levels where they currently remain. The VH is 3 points weaker at -119 continuing to suggest limited physical nearby demand. The HK is 1 point weaker at -13.

In London the ZH is a tad weaker at -5.50 as is the HK at -5.90. This puts the ZH WP at 52.30 and the HH WP 57.70. The market looks set to re-main welded to the oil price for the time being. Currently, crude is nearly 1% lower again having slipped below $58 per barrel. Nevertheless, prices look unlikely to drop back to the lows of last week so a period of consolidation may be seen. Technical support seen at 11.98 (10 day ma) then 11.74 (recent low) then 11.68 (lower BB). Resistance seen at 12.18 (mid BB) then 12.10 (Monday’s high) then 12.55 (double top) then 12.67 (upper BB).

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

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