Market Commentary

07/02/20: Sugar Market Morning Report

Good morning,

The market saw another dip lower yesterday before recovering to settle marginally higher as the upside momentum was maintained. The market had opened 4 points firmer before immediately dropping lower losing another 22 points over the next 40 minutes. Good support noted at prices approached 14.50 which brought in some light fresh trade buying which buoyed prices slightly. Better gains were seen during the afternoon as prices pushed into the plus column and back to opening levels. However, prices fell away again to register the lows for the day before another bout of speculative buying saw new highs for the day being hit before the close. The HK ended 2 points lower at +20 while the KN lost 4 points ending at +9. In London the HK ending slightly lower at +6.30 as was the KQ ending the day at +5.40. The market continued to consolidate after hitting multi-year highs on Tuesday. The bulls will see it as a constructive close with the market readying itself for another test of the highs.

The market continues to be underpinned by lower global production with major drops expected in India and Thailand. Other major producers have also seen production levels drop including the USA. Unseasonal freezing weather hit their beet crop hard and has meant total sugar production is expected to drop from 7.20 million tonnes in 2018/19 to 6.85 million tonnes in the current 2019/20 season their lowest output for nine years. This has forced the USTR to reallocate unused quota for importing raw sugar. 78,071 tonnes of raw sugar has been reallocated which is likely to be imported from Dominican Republic, Brazil and Australia. It is likely the quotas will be adjusted further. US supplies have tightened further due to a drought in Mexico.

This morning the market opened 1 point firmer before swiftly slipping into the negative column albeit just by a few points before a recovery is seen with prices soon bettering yesterday’s high. The HK and KN are unchanged at +20 and +9 respectively. In London the HK is trading slightly firmer at +6.70 while the KQ is firmer at +6.80. As of the 5th February the OI in H-20 remains very high at 32,496 lots (1.62 million tonnes). The total H-20 volume yesterday was not particularly high (6,134) so the OI is unlikely to drop too much and with just six sessions to go until expiry it could get volatile over the coming week. It also looks as the delivery will be large with willing receiver(s). Sunday see the start of the three day annual Dubai conference when the good and great of the sugar industry gather to discuss the state of the industry. This year the mood will certainly be more positive than for the past couple of years with a large production deficit expected for the current season and perhaps beyond. The issue of muted consumption due to health concerns and sugar taxes are likely to be ignored. In the past a conference rally has often been seen as traders swap bullish stories – will that be the case this year? Technical support seen at 14.63 (10 day ma) then 14.52 (mid BB) then 14.10 (lower BB) then 14.05 (recent low). Resistance seen at 14.94 (upper BB) then 15.13 (recent high) ) 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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