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Sugar Market Report for 27 January

Good morning,

The market rocketed higher yesterday to settle at its highest level since 23rd December in good trading volume. The market had opened 3 points lower but that was the low of the day as prices immediately motored higher gaining 45 points by mid-day. After a brief breather prices started to rally another 25 points before some profit taking appeared. However, as the close approached the market made the highs of the day before, again, slipping back on the close. Unsurprisingly, the HK gained 9 points to end at +136 while the KN was up 12 points to +79. In London, things were quieter with the gains more limited as the spot month premium continues to weaken. The HK dropped to +9.80 the first time it has dropped below +10.00 since the end of November. It is now $17 off the highs hit just before Christmas. The KQ improved slightly to end at +17.00. This meant the HH WP dropped below 100.00 to end at 99.10 while the KK WP slipped to 119.30. It is difficult to pinpoint the reason for the rally yesterday. The physical tightness of raw sugar and the need for some end-users to price has seen some of the large trades houses start to squeeze the spot month knowing there is very limited selling above the market. Chatter that India will not allow further exports and that Brazil’s fuel policy may favour ethanol production all added to the mix. Additionally, the macro was firmer with expectations that China will increase demand over the coming weeks and months now the economy is fully open after Covid.

For what it is worth Brazil’s CS crushed 440k tonnes of cane during the first half of January producing 19k tonnes of sugar. This compares with no production this time last year. Only 13 mills were active but only 3 processing sugarcane while the others were making corn-based ethanol. The season is now, essentially, over with just shy of 33.5 million tonnes of sugar being produced. Prospects for the next cane crop look excellent with some seeing up to 600 million tonnes of available cane. The question is what will be the split between sugar and ethanol. The surge in corn-based ethanol production will impact along with crude prices and Lula’s government fuel policy. It would seem a forgone conclusion that Jean Paul Prates will be voted in as the new CEO of Petrobras given he resigned as senator yesterday.

This morning the market opened 8 points firmer but has, subsequently, fallen back slightly and are currently 1 point higher. The HK is 3 points firmer at +139 while the KN is 1 point stronger at +80. In early London trading, the HK and KQ are unchanged at +9.80 and +17.00 respectively. This morning the macro is mixed with crude slightly firmer while grains are slightly weaker. The USD index is also firmer while the BRL was unchanged at 5.07 last night. The market looks strong and further gains look likely as there is little resistance above the market as there is very limited producer selling against H23. Nevertheless, current levels are high for a market that will very likely, see a surplus in production later this season. However, for the time being any dips will, probably be seen as a buying opportunity.

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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