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Sugar Market Report for 10 November

Good morning,

The market spiked higher yesterday hitting its highest level since 19th July as fund buying met with good Indian producer selling. The market had opened 5 points lower before slipping further to put the lows of the day in place in early trading. The market spent much of the morning within the previous day’s range but as US traders got to their desks more fund buying appeared quickly taking prices higher. It would appear the breaching of the 19 cent level triggered the buying. Good producer selling, mainly from India, was noted and this did, initially, stop the rally at around 19.25 with prices dropping back to 19 cents. However, another wave of fund buying took prices through the earlier highs as buy stops were triggered which saw prices hit 19.43 on the close. Prices did drop back to below 19.30 post-settlement but it was an impressive performance and, probable, a surprise to most. The HK improved 4 points to +98 while the KN was 9 points firmer at +66. In London, it was a quieter affair with the ZH and HK marginally lower at +19.80 and +6.80 respectively. The OI in Z-22 fell to 20,865 lots with another 11,147 lots traded yesterday. The WP also slipped with the ZH ending at 116.20 and the HH WP at 96.40. There continues to be no outstanding bullish factor to explain the rally. However, the funds have bought meeting limited resistance until prices pushed above 19 cents where Indian selling was waiting after the Government announced 6 million tonnes of exports will be allowed in the first tranche of export quotas. There does remain concerns over Brazil’s CS to better last year’s total sugar production of 32 million tonnes. Unica will release the second half October harvest date today.

As expected Indian sugar mills have sold into the rally as they sign large quantities of export deals. At least 1 million tonnes of exports have been concluded and it is expected that the entire 6 million tonnes could be sold by the end of the year with shipment periods out to March.

Rabobank reported yesterday that they see Brazil’s CS total cane crush of 575 million tonnes for 2023/24 compared with 540 million tonnes this season. They see CS total production at 35 million tonnes up from 32.5 million tonnes this season.

The USDA reported yesterday that they have lowered their outlook for sugar supplies in the US this season. The USDA estimate total sugar supply for 2022/23 at 14.34 million short tonnes compared to 14.54 million short tonnes in their October estimate. Therefore they have lowered their stocks-to-use ratio at 13.5% down from 14.8%

As mentioned above Unica will release their harvest data for the second half of October at 15:00 (London time). A S&P poll sees the crush for the period around 30 million tonnes producing 1.88 million tonnes of sugar from a 47/53 split. Last season the crush was almost finished as the cane continued to suffer from the extreme drought. Just 17 million tonnes of cane was crushed producing 858k tonnes of sugar.

This morning the market opened 12 points lower but not too far from the last traded price yesterday. Currently, prices are 8 points weaker. The HK and KN are unchanged at +98 and +66 respectively. In early London trading, the ZH is slightly weaker at +19.20 while the HK is virtually unchanged at +7.00. The macro is mixed this morning with crude lower, grains/soya mixed and the USD Index slightly weaker. The BRL ended around unchanged at 5.17. The market has seen an impressive recovery from the lows hit less than a fortnight ago. The near 190 point rally has been exaggerated by fund buying initially covering shorts but now build longs. It could be argued the market has rallied to where the biggest volume was waiting and needed to rise to allow Indian mills to sell. The market could improve further as the funds continue to buy but with more Indian selling and a likely global surplus for the season, it is difficult to justify any further significant gains. Unica is not likely to have any significant impact unless sugar production comes in a lot lower than expectations.

Contact the ADMISI Sugar Desk team:

Phone: +44(0) 20 7716 8598

Email: admisi.sugar@admisi.com

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, 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 may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

 A subsidiary of Archer Daniels Midland Company.

 © 2022 ADM Investor Services International Limited.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, 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 may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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