Market Commentary

01/06/20: Sugar Market Morning Report

Good morning,

The market ended at the top end of the range for the month on Friday but it was another quiet, range-bound day as traders continued to remain generally side-lined. The market had opened 3-5 points firmer and held these gains for the morning. However, interest during the first half of the day was virtually non-existent. However, as the US started to get to their desks values did improve pushing up to the highs of the day but, again, running into rather heavier selling just shy of 11.00 cents. This triggered a bout of speculative long liquidation which saw prices drop nearly 30 points and took prices to the lows and into the negative column where they remained for the next couple of hours. However, prices did improve by the close settling some 10 points better although the trading volume remained thin throughout the session. The NV improved 5 points to end at -6 while the VH finished virtually unchanged at -67. In London the front spread lost ground again as profit taking continued. The QV slipped almost $2 to settle at +16.20 while the VZ ended a tad firmer at +7.70. This put the QN WP slightly weaker again at 121.50 and the VV WP a tad firmer at 104.00. The market continues to remain range bound. During last week the market dropped back from over 11 cents but found good support at 10.50.

The COT report as of the 26th May showed that the funds/specs now have a net long positions of 5,612. This is due to the fact the non-commercials cut their net short again by 18,313 to just 5,381 on a mixture of short covering and fresh buying. There still appears little appetite for the larger, long term funds to get actively involved but an improving macro picture may change this view before long. The commercials increased their net short position by 18,426 to 223,116 on producer pricing and some limited end-user pricing suggesting that Brazilian mills see prices above 11 cents as attractive with weak BRL and limited ethanol demand. The Index funds increased their net long position by 2,307 to 217,554.

In the Indian state of Uttar Pradesh sugar production has hit a new record of 12.503 million tonnes of sugar as of the 28th May. This is despite a two month lockdown and suggests India’s total sugar production may creep over 27 million tonnes by the close of the season. This suggests that next season Indian sugar production could bounce back to close to the record 32.5 million tonnes produced in 2018/19 assuming the just-starting monsoon is normal.

This morning the market opened 6 points higher before jumping another 15 points on good market buying and limited selling until prices hit 11.10. Prices currently 16-17 pints higher. The early trading volume is better than of late. The NV is 3 points better at -3 while the VH is 2 points better at -65. In London the improvement in the flat prices has seen the QV firmer at +17.10 while the VZ is also firmer at +8.30. The BRL ended the week slightly weaker on the day at 5.346 while, this morning, crude is unchanged. A full OPEC meeting has been brought forward by a week to June 4th. A lack of Russian opposition to this earlier date may mean they are more in agreement with Saudi Arabia on how productions cuts should continue for the rest of the year. While this may not see crude prices surge it should put a floor in prices. Sugar prices will, eventually, break out of the range seen over the past month. If the macro can continue to improve then the up-side would seem likely although whether the up-side has huge potential is probably unlikely. Any rally at the moment is only likely to attract more Brazilian pricing and, therefore, more production.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598


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