Written Commentary
Good morning,
Yesterday saw the market drop to end at its lowest settlement since 3rd May as more long liquidation was seen which appeared to be absorbed by end-user pricing. The market had opened 4 points lower before continuing to drop losing another 17 points before some support was found at just above 25.50. Prices soon improved with a large spike in prices mid-afternoon which soon petered out with prices retreating to the earlier lows. However, some market-on-close selling saw prices drop to the day’s lows thereby putting in a double bottom at 25.46 first reached last week. The NV lost 4 points to end at +28 while the VH dropped 7 points to +41. In London, it was a similar picture with the structure weakening slightly. The QV finished nearly $2 lower at +10.90 while the VZ was also lower at +12.80. The VV WP ended at 141.30 while the VZ WP finished at 128.50. The market continues to lose the up-side momentum seen over the past few weeks as tired longs exit. However, end-users are taking advantage in the slide in prices to price.
One reason for the weakness seen yesterday is the imminent release of the Unica harvest data for the 1st half May (today at 15:00 London time). With ideal crushing conditions over the reporting period, it is expected the data will be good and show that things are catching up after a slow start to the season due to late rains. The usual survey of traders and analysts by S&P Global Commodity Insights is expected to show mills crushed around 40.7 million tonnes with sugar production at 2.21 million tonnes. Some even believe record production could be seen for the 1st half of May. Many mills have been operating 24/7 to take advantage of the current, very high prices.
A Syrian government agency has issued an international tender to purchase 25k tonnes of raw sugar according to European traders. The deadline for submission of prices in June 21st. The price will be in Euros and shipment is sought 70 days after confirmation of letter of credit being opened.
This morning the market opened 9 points lower before falling further breaching the double bottom formed yesterday at 25.46. Currently, prices are 18 points lower. The NV is 1 point weaker at +27 while the VH is also 1 point weaker at +40. In early London trading the QV is slightly weaker at +10.70 and the VZ at +12.50. This morning the macro is slightly negative with crude lower while grains/soya are mixed and the USD Index is stronger. The BRL finished at 4.95 yesterday. The market looks set to drop lower. It would seem the Unica numbers are expected to be good and, therefore, bearish which possibly explains the recent weakness. How much the market could drop will probably depend on the funds and whether they decide to liquidate more longs. Good scale down buying is in place but it is unlikely it would halt the slide if the funds did cut the majority of their longs. While the funds are sitting on very good profits and they have not taken much cover even when prices dipped below 25 cents they may take a different attitude now. Of course, if Unica is not as good as expected then prices could improve quickly given there is little selling resting above the market.
Contact the ADMISI Sugar Desk team:
Phone: +44(0) 20 7716 8598
Email: admisi.sugar@admisi.com
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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.
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