Written Commentary
Good morning,
The relentless rally in sugar continued yesterday with fresh 11 year highs being posted. The market had opened slightly weaker soon dropping further. The market then settled into a trading range either side of unchanged for the rest of the morning before dipping to the lows of the day as US traders got to their desks. The market continued to remain in the negative column until just over an hour left in the session when an aggressive bout of buying and short covering appeared sending prices sharply higher. The previous day’s highs were soon breached with more buying appearing. The market became particularly volatile in the last 15 minutes of trading when prices dipped back on late profit taking before improving post-settlement. The KN jumped 9 points to end at +68 while the NV was 5 points firmer at +42. The OI in K-23 dropped to 47,870 lots with another 33,777 lots traded yesterday continuing to point to a small delivery. In London, the structure improved slightly with the QV up at +12.60 and the VZ a tad firmer at +10.70. The WP also pushed higher with the VV WP at 129.20 and the VZ at 118.50. Sugar has been hit by the perfect storm with dropping production from India, Thailand and China and a slow and hampered start to the Brazilian CS harvest due to rain.
As mentioned above higher than average rainfall across Brazil’s CS region has meant the harvest has got off to a slow and soggy start. It is estimated that around 7 days have been lost to rain. Unica is yet to release their data for the first half of April but should be out by the end of this week. The weather has now started to dry up and further dry weather is now forecast for the next couple of weeks. This will allow mills to get up to top gear but probably too late to get sugar out for delivery against K-23.
ISMA have reiterated their concerns over total production for the Indian 2022/23 crop which they now expect to struggle to reach 33 million tonnes some 3 million tonnes less than pre-harvest estimates. This will confirm to the market that no further exports will be allowed this season but this is in the market already.
This morning the market opened 5 points firmer. Currently, the market is back to unchanged. The KN is unchanged at +68 while the NV is 1 point weaker at +41. In early London trading, the QV is a tad firmer at +12.80 while the VZ is firmer at +11.60. This morning the macro is positive with USD Index weaker and most commodities higher. Sugar is completely disconnected from the macro at the moment as fundamentals dominate proceedings. The market continues to look exceptionally strong with, seemingly, little reason to drop too far. The funds are long and very happy to ride the bull wave. End users have been forced into pricing on concerns prices could push higher still. Many have expected a pull back as the market remains, technically, very over-bought but this is not a given and certainly will not apply to the soon to expire spot month. If the Brazilian CS harvest does manage to get going to full potential then this may start to weigh on the market but potential concerns over the India monsoon and the EU beet crop will keep prices well supported for the time being. Nevertheless, if the funds were to start to lessen their longs there may be limited buying below the market after end-users have covered.
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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