Written Commentary
Written by Howard Jenkins, Head of Global Commodities, ADM Investor Services International Limited
The week has seen prices continue to improve mainly on fund buying. However, in an attempt to put a fundamental slant on the continuing rally chatter about dry weather across the Brazilian cane regions and the possibility of a late and slow start to the Indian harvest have been cited. The former may have some validity but India does appear to be gearing up for a big production figure after a very decent monsoon season.
The biggest excitement of the week was the October expiry which saw the largest delivery ever. Just under 2.58 million tonnes was delivered virtually all from Brazil slightly debunking the dry weather concerns. The usual debate on whether such a large delivery is bullish or bearish continues. Too much sugar available or a sign of good demand – perhaps only the sellers or buyers know. Suffices to say, in the past, very big or small deliveries generally have no long term impact on prices.
Most analysts see the dry weather in Brazil as something to be monitored at the moment with some believing there is no reason to get too concerned until early next year. The news that La Nina has developed and, therefore, might cause dry weather across southern South America may have caught the attention of the fund managers but, as seasoned traders knows, predicting weather issues is notoriously perilous. Sugar cane is, after all, very resilient.
This morning we wake up to the news that President Trump and his wife has tested positive to Covid-19 which has seen mixed views across the world. Nevertheless, the news has caused the equity markets to tumble pulling most commodities lower including sugar. Some will point to the recent low trading volume in sugar as a sign that the recent sugar rally is built on questionable foundations. Time will tell on whether both President Trump and sugar recover unscathed.
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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