Market Commentary

20/04/20: Sugar Market Morning Report

Friday saw prices improve again. The market has gained nearly 40 points in the last three sessions as the weak crude and BRL seem to be ignored. However, the trading volume was limited suggesting many traders are taking a ‘wait and see’ attitude. The market had opened 2-4 points firmer before continuing to improve another 12 points during the morning. Prices quickly dipped back to opening levels as US traders got to their desks but values never fell into the negative column and it was not long before prices started to improve again as a fresh bout of short covering appeared to take prices to the day’s highs and their highest level since late March when prices were on their way down to their lowest levels since September 2018. Prices did fall away slightly from the highs by the close but it was still a positive close for the day and week. The KN settled 1 point firmer at -16 while the NV was unchanged at -23. In London the QV ended slightly firmer again at +10.00 as did the VZ at +1.00. This put the QN WP at 108 and the VV WP at 93.00. This suggests there is still a tightness of white sugar that will probably extend into the Q-20 delivery. However, with large quantities of Brazilian raw sugar soon to arrive on the market and the current healthy White Premium locked in by refiners it probably will not be too long before the white supply may improve significantly. It would appear the market has decided that prices may have fallen enough over the past two months. Prices had dropped around a third of their values since prices hit multi-year highs back in the middle of February. There are still analysts who believe the lows have not been reached with some still talking 8.50 cents as possible. Much will depend on Brazil CS sugar production. Over the coming weeks the market will gauge the extent mills will switch but to produce the amount of sugar that would take prices down to below 9 cents will need over 45% cane to sugar and ideal harvesting conditions and the desire of the mills to crush all available cane. Time will tell if this can be achieved.

The COT as of the 14th April showed the funds/specs had increased their net short position by 19,746 to 40,716. The non-commercials increased their net shorts by just under 11k lots to 43,151. There was an gross increase by the shorts and also the longs as a small minority are perhaps beginning to see current prices as cheap. It will be interesting to see how quickly the fund shorts cover positions if prices continue to improve. The commercials cut their net short position by 24,922 to 165,596 as the trade covered shorts and end users continued to price. The Index funds cut their net long position by 5,176 to 206,311.

This morning the market opened unchanged but soon dropped 15 points on some selling against a weaker macro with both crude and equity markets lower. Prices have pulled off the lows and are now around 10 points lower on the day. The KN is 1 point better at -15 while the NV is 1 point weaker at -24. In London the QV is a tad weaker at +9.20 as is the VZ at +0.70. The market looks set to continue to build a bottom around current levels. However, it is likely traders will remain very nervous of any significant moves in the macro especially on the down-side. As mentioned above the trading volume has dropped over the past week. The old market adage that any significant move need to be substantiated by decent volume, perhaps, should be remembered. 

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598

Email: admisi.sugar@admisi.com

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