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Sugar Market Report for 4 October

Good morning,

The market dropped yesterday as post-expiry sentiment weighed on the market with prices settling at their lowest level since 19th September. The market had opened 11 points higher buoyed by a much stronger crude market but soon started to slip away erasing the early gains by mid-morning. Prices did improve again as crude further improved but opening levels were unable to be bettered and prices soon started to sag with sell-stops triggered as prices dropped through 17.70. The market dropped 20 points in as many minutes before finding some support at 17.45. However, just before the close another bout of selling took prices to the lows of the day. Some late day-trader short covering saw prices pull off the lows but it was a poor performance. The now spot month lost ground against the rest of the board with the HK dropping 7 points to end at +67 while the KN weakened considerably losing 12 points to end at +28. In London the structure held its ground with the ZH ending around unchanged at +36.90 while the HK was weaker at +10.30. The ZH WP finished at 140.00 while the HH WP was at 118.00. It was probably somewhat inevitable that the market would weaken once the V-22 expired which had held a large premium. The view that adequate supply will soon prevail especially in raws pressurised the market with some chatter that Indian mills were selling in anticipation of the Indian Government make announcements regarding their export policy by the end of next week and a view that total production may exceed the 36 million tonnes produced in 2021/22.

The ICE exchange officially confirmed 14,652 lots were delivered against the V-22 contract. All the sugar was Brazilian with the majority being shipped out of Paranagua (560k tonnes) with the rest from Santos. Louis Dreyfus was seen as the largest deliverer with Czarnikow while Wilmar was the largest received with S&D Paris also receiving. The relatively small delivery at a large premium would suggest it was bullish for the market but, obviously, this was not a view taken by all.

Czarnikow reported yesterday they see a global surplus of 3.6 million tonnes in 2022/23 as it cuts its Chinese consumption figure due to Covid lockdowns. They see total production of sugar at 179.9 million tonnes with consumption at around 176.1 million tonnes. Czarnikow said that Mexico, Thailand and the EU had seen adverse weather which may cut production while Russia and some other minor producers are expected to exceed earlier expectations.

Brazil exported 3.08 million tonnes of sugar in September compared with 2.55 million tonnes in September 2021.

This morning the market opened 10 points firmer mainly on an improving macro picture and a stronger BRL. However, prices have retreated and are now 4 points higher. The HK is 2 points firmer at +69 while the KN is also 2 points firmer at +30. It is a quiet start in London. The ZH and HK are valued around unchanged at +36.90 and +10.30 respectively. The macro, as mentioned above, is a more positive picture than of late with most commodities trending higher while the USD Index is much lower again and now over 3% down on the 20 year highs hit last week. The BRL ended considerably stronger at 5.16 after the Brazilian Presidential election saw a rather closer contest between Lula and Bolsonaro than had been expected. The election now goes to another vote between the two at the end of the month. Sugar looks likely to edge lower although the macro will continue to help support. There seems little potential on the up-side at the moment although if production slows across the CS then there could be some scope for prices to improve back to above 18 cents.

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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