Market Commentary

11/10/19: Sugar Market Morning Report

Yesterday saw another day of consolidation following the 45 point drop on Monday. It was also another dull session with limited volume especially during the morning. The market had opened a couple of points weaker before climbing 7 points and into the plus column over the next hour. Prices remained range bound until just after mid-day when prices improved slightly to hit the day’s highs. However, the buying soon dried up with prices soon dropping to the day’s low and the low of Monday thereby forming a double bottom (12.32/31). With decent support noted from 12.30 and below a bout of short covering took prices back into the plus column before settling unchanged on the day. The HK improved by 1 point to settle at -10 while the KN was also 1 point better at -13. In London the ZH made a new high at 5.50 although it had fallen back to 2.00 by the close on some light long liquidation. The HK remained around unchanged at -4.70. The prospects of a fund short covering rally similar to the one seen last October now seem a bit of a forlorn hope. The funds have now probably covered over a third of their net shorts and with more producer selling waiting above the market any significant rally developing in the short term would now seem unlikely.

There is little fresh fundamental news around at the moment. Trader await the start of the Indian 2019/20 cane harvest which should give some indication of the likely size of the drop in production although it will be several months before an accurate production figure will emerge. US 2019/20 sugar stocks/use ration is put at 14.5% by the USDA in their report released yesterday. This compares with 14% this time last year. US weather forecaster CPC said yesterday that no active El Nino / La Nina expected through the Northern hemisphere winter. This was supported by the Japanese weather bureau who also reported yesterday that there is a 60% chance there will be no El Nino or La Nina through the coming winter.

This morning the market opened 1 point weather before improving and moving into the plus column albeit by just 3 points. The HK and KN are both unchanged at -10 and -13 respectively. In London the ZH is firmer at 2.90 as is the HK at -4.10. This puts the ZH WP at 65.80 and the HH WP at 63.00. It would seem the consolidation will continue for the time being. The market is caught within a range. The downside would seem limited to around 12 cents while the up-side appears to be capped around 13 cents. Longer term a break-out on the upside looks more likely but traders will probably need more concrete news on Indian production before this happens. Technical support seen at 12.32/31 (double bottom) then 11.92 (lower BB and recent low) then 11.84 (September low). Resistance seen at 12.46 (mid BB) then 12.61 (10 day ma) then 12.86 (100 day ma) then 12.98/99 (double top and upper BB).

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