Market Commentary

03/02/20: Sugar Market Morning Report

Friday saw prices again try to push higher but running out of steam before challenging the highs seen earlier in the month. The market had opened 5 points firmer before jumping another 17 points over the next three minutes. This also turned out to be the high of the day with prices soon retreating slightly. Another attempt to push convincingly through 14.80 failed mid-morning. This second failure to break higher triggered some day trade long liquidation which took prices into the negative column for the first time. Prices did improve marginally but another return to losses was seen late in the session although on the close prices did manage to improve enough to register a slight improvement on the day. The HK slipped a couple of points to +26 after the huge gains of the previous session. The KN ended unchanged at +12. In London the HK also slipped back to end at +7.00 while the KQ ended virtually unchanged at +6.60. Friday was a bit a non-event with much of the action seen in early trading. Nevertheless, prices remain firm with the highest weekly settlement since early January 2018. The strengthened of the structure both the NY and London suggests a fundamental shift in sentiment and points to another attempt to push through 15 cents before too long.

The COT as of the 28th January is likely to be seen as a bit of a surprise. It showed that the funds/specs increased their net longs by 13,964 (the non-commercials increased by 14,600) to 125,550 during a period when prices jumped 35 points then falling 85 points before improving 70 points (much of which was done during one session). Interestingly, the commercials only saw a 18,080 increase in the net short position to 381,147 as both end-users and producers priced. It would seem the shorter term funds were active during the reporting period while the larger long term funds may be waiting to add to their longs if and when prices break above 15 cents. The fact the end-users were active suggests they are concerned prices may also improve further while producers are happy to price on a scale up basis especially Brazilian millers while the BRL weakens. The Index funds cut their net long position by 4,115 to 255,597.

Thai sugar production in the current 2019/20 season is likely to fall 28% to 10.5 million tonnes according to Rangsit Hiangrat the director general of the Thai Sugar Millers Corp. This would be the lowest production for nine years and is mainly because of dry weather which has impacted on cane production. He went on to say that Thailand could export 6-7 million tonnes during 2020 down from 11 million in 2019.

This morning the market opened 7 points lower before slipping another 10 points over the next 30 minutes. Currently prices are trading just off these lows in reasonable volume. The HK has also dropped 4 points to +22 while the KN is also 4 points weaker at +8. In London the HK is a tad weaker at +6.60 while the KQ is firmer at +7.50. The HH WP has jumped again to be valued around 91.30 while the KK WP is around $3 firmer valued at 88.00. The main factor for the early weakness today would appear to be the macro with most commodities lower this morning as the markets continue to be concerned over the spread of the Coronavirus. The BRL ended at its lowest level for some weeks at 4.2820. The apparent reluctance of the larger funds to increase their net long positions may also be weighing on prices. Nevertheless, there would seem little reason for prices to collapse from their current levels and a test of the highs still seems on the cards probably when the macro allows. Technical support seen at 14.28 (mid BB) then 14.05 (recent low) then 13.79 (previous resistance) then 13.56 (lower BB). Resistance seen at 14.51 (10 day ma) then 14.90 (recent high) then 15.00 (upper BB) then 15.37 (high January 2018 on 1st month continuous).

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598


Registered in England No. 2547805 a subsidiary of Archer Daniels Midland Company. Risk Warning: Investments in Equities, CFDs, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value, investors should therefore be aware that they may not realise the initial amount invested, and indeed may incur additional liabilities. These Investments may entail above average financial risk of loss, and investors should therefore carefully consider whether their financial circumstances and investment experience permit them to invest and, if necessary, seek the advice of an independent Financial Advisor. Some services described are not available to certain customers due to regulatory constraints either in the United Kingdom or elsewhere.