Market Commentary

22/01/20: Sugar Market Morning Report

Good morning,

Another solid performance seen yesterday as prices improved again with settlement at the highest level since early January 2018 (front month). Nevertheless, values were unable to break decisively higher making just a 1 point improvement on the high for the move. The market had opened 5 points better, on the back of a stronger London settlement the previous day when NY was closed for National holiday. However, prices soon retreated as the usual market-on-selling appeared taking prices down 11 points from the opening levels. This turned out to be the low of the day with good buying noted at 14.40 and below. The market trod water for much of the morning caught within a narrow 8 point range. Once US traders started to get to their desks prices started to improve as a bout of fund buying took prices up to the recent highs where good selling was encountered. Although the high of last Thursday was bettered it was only by one point. It did not trigger any significant additional fund buying so it was not too surprising prices then dropping 14 points on a bout of long liquidation. However, by the close prices were back to just shy of the highs and looking primed to make another push higher today. The HK ended 1 point firmer at +6 while the KN was a couple of points firmer at +6 as well. In London the HK improved to end at +3.50 while the KQ was also firmer closing at +3.10. With the funds in a distinctly buying mood it is not too surprising prices remained firm yesterday – it was probably only odd that more extensive gains were not seen. Good producer selling noted on a scale up basis and the funds/specs are being more circumspect now the market is slightly over-bought and they are probably around 120k lots net long.

There was little fresh news around yesterday. The Indian and Thai harvest are both lagging significantly behind last year’s production (which, it should be remembered, were both record production). Sentiment is now more positive than it has been for a couple of years although tempered because of high stocks, slowing consumption and Brazil’s ability to increase sugar production if the price is right. Brazilian millers are taking a keen interest further down the board which does not bode too well for the 2020/21 season when Indian production is likely to push back to over 30 million tonnes.

This morning the market opened unchanged before dropping a couple of points where prices currently remain. The HK and KN are unchanged trading both at +6. In London the HK is virtually unchanged at +3.50 while the KQ is a tad lower at +2.80. This puts the HH WP at around unchanged at 81.50 and the KK WP at just over 79.00. Good volumes seen in the WP yesterday especially in the KK which saw good volume done at 79 with further good selling awaiting at 80.00. With prices hovering some 5 points below the recent highs it seems very likely another attempt to break higher will be seen today. Another failure to break above 14.60 might trigger a more significant correction but it is doubtful any sentiment changing decline will be seen. As mentioned before the funds have ample ammunition to buy considerably more – how much more will dictate how high prices can move. Technical support seen at 14.22 (10 day ma) then 13.84 (mid BB) then 13.41/40 (double bottom) then 13.10 (recent low). Resistance seen at 14.57/58/59 (triple top) then 14.79 (upper BB) then 15.37 (high Jan 2018) then 15.49 (November 2017 high and double top).

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598


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