Market Commentary

31/07/19: Sugar Market Daily Report

The market pushed higher again yesterday rising to its highest level since 15th July. However, the gains were unable to be maintained and prices ended some 15 points off the highs although still higher on the day and the 4th consecutive higher settlement. The market had opened unchanged before swiftly moving into the plus column. Prices then settled into their usual narrow morning trading range. Yesterday it was just 7 points until mid-day when a further improvement was seen. A couple of hours later prices hit the day’s highs after several buy stops were triggered as the double top at 12.21/23 was breached. However, this rise did not appear to trigger any significant fund short covering so prices eased back on day trader liquidation which meant the market settled in the lower half of the range although at its highest settlement since 12th July. The VH ended 1 point better at -97 while the HK was 1 point weaker at -13. In London the VZ was firmer at -9.70 while the ZH was virtually unchanged at -11.60. The bulls will have been slightly disappointed with the market performance. The large fund short position, positive previous close and higher oil prices was the reasons for the push up to 12.30. However, interest was limited with another day of relative low volume. The old adage that no move is confirmed unless accompanied by volume seemed to be ring true yesterday.

EU sugar stocks fell in May from the previous month by 1.48 million tonnes to 7.541 million tonnes according to commission data. This figure is also below the 9.185 million tonnes at the same time last year when record EU production had been seen.

 Al Khaleej Sugar Refinery plans to complete construction of a beet sugar factory in Egypt, aimed to be the world’s biggest, in October 2020. The project, to be located in Egypt's west Minya, will produce 900,000 metric tonnes of beet sugar a year, at an estimated cost of US$1 billion. Islam Salem, CEO of Canal Sugar, company said production at the factory is expected to begin in 2021. Canal Sugar also announced on July 30 that it plans to invest US$200 million to build a pier and grains terminal in Egypt’s port city of Damietta, with a discharge capacity of 3,000 tonnes of grains per hour.

Frustrated by current low prices because of overproduction? FO Licht is looking into the future and seeing another deficit sea-son of 4.6 million tonnes in 2020/21 which is not a huge surprise. Five years hence in 2024/25 they see total global sugar production at 200 million tonnes with total consumption also at 200 million tonnes. The 16 million tonne increase in production from the current level of 184 million tonnes India and Thailand are expected to remain the largest Asian producers as will Brazil in South America. African production will increase by a marginal 1.6 million tonnes. FO Licht expects a reducing growth in consumption from the current 1.6% to 1.2% due to the introduction of more sugar taxes and a change in the formulation of confectionery and sugar-containing products as health concerns over sugar consumption.

The market opened unchanged this morning before improving 5 points. However, these gains were short lived with prices quickly dropping back to unchanged where they currently remain. However, after 45 minutes of trading the total volume is exceptionally thin. The VH is 1 point better at -96 while the HK is unchanged at -13. In London bot the VZ and ZH are virtually unchanged at -9.80 and -11.50 respectively. This puts the VV WP unchanged at 55.50 and the ZH WP slightly weaker at 43.80. An-other attempt to break higher could be seen today. The double top at 12.30/32 needs to be breached and a favourable macro is also probably needed. However, even if this was to happen the market would only be moving back into the range seen the beginning of June. While there is little producer selling around at current levels it is likely to build at above 12.50. Despite the down-side looking decidable limited prices could sink back to below 12.00 cents if the recent improvement stalls. Technical sup-port seen at 12.09 (mid BB) then 11.92 (10 day ma) then 11.51 (lower BB) then 11.39 (recent low). Resistance seen at 12.30/32 (double top) then 12.58 (100 day ma) then 12.68 (upper BB) then 12.93/4/5 (June highs).

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

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