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Weekly Sugar Wrap

Written by Howard Jenkins, Head of Global Commodities

It has been another frustrating week in sugar. The Indian government remain tight lipped over their export policy for this season. The market is growing tired of the wait and both trading volumes and prices have sunk. An early attempt to push up the previous week’s 8 ½ months high was pretty half-hearted with prices eventually taking a sizable tumble on Wednesday dropping exactly 100 points from those highs. The front spread has also weakened from over +100 points to currently sit around +80. The market has lost the momentum that saw prices improve nearly 400 points since mid-September and this has prompted some fund liquidation who are probably eying better opportunities elsewhere. There maybe also a growing view that the tightness in physical supply calculated for the early part of next year may have been slightly over egged and, despite a lack of Indian exports, other producer may be able to fill the gap especially as demand does not seem particularly robust.

The Brazilian harvest is slowly coming to an end for this season. The Unica harvest data for the first half of November was slightly better than expectations. Another 1.24 million tonnes of sugar was produced bring the cumulative total for the season to 37.66 million tonnes which is now a record production for the CS region. To put this in perspective it is over 11.5 million tonnes more than had been produced this time last year. With the majority of mills finishing field operations by the end of this month the total production should just creep over 38 million tonnes.

The New York market was closed yesterday as the US celebrated Thanksgiving and, for some, that Trump has, finally, conceded he may have lost the Presidential election. The equity markets remain firm with the Dow Jones index hitting an all-time high of just over 30,000 earlier in the week as more positive news regarding vaccines for Covid is released. There is also a growing view from some investment banks that agricultural commodities are now seen as an investment asset. The funds have bought a record amount of agricultural futures in 2020 defying pandemic concerns. There are several reasons cited: China’s import demand for agri commodities continues to grow, La Nina is lurking threatening to cause dry weather across parts of North and South America and Food inflation may see certain governments rush to secure basic food supplies. Sugar is likely to benefit from this investment enthusiasm so any wholesale sell-off by the funds is unlikely. Whether there is any real justification for prices to significantly improve remains to be seen regardless of India.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 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.

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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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