Sugar Market Report

Good morning,

The market ended lower yesterday after hitting a fresh 8 ½ month high in early trading. The trading volume dipped with prices. The market had opened a little lower but soon improved on some early speculative buying. Prices soon pushed through the previous day’s highs to register a new high for the move (15.66). However, there was little follow-through buying and prices slipped back to opening levels during the morning. Prices remained within a relatively narrow range until mid-afternoon when a bout of profit taking appeared taking prices down some 30 points in limited volume emphasising the lack of resting orders in the market. Prices managed to pull off the lows on the close to secure another positive close. The HK also saw some profit taking after its surge the previous session ending 11 points lower at +93. The KN was also weaker finishing 3 points weaker at +74. In London the front two spreads also weakened after their improvement on Monday. The HK dropped a sizeable $4 to +10.20 while the KQ was $3 weaker finishing at +12.50. This meant the HH WP also slipped $3 to 76.60 while the KK WP was also slightly lower at 87.00. It was perhaps inevitable a bout of profit taking was seen yesterday after the market had gained over 120 points in less than a week especially as here was little change in the fundamental picture. However, the drop was limited and more of a small correction which suggests prices may improve again.

The International Sugar Organisation reported yesterday that they now see a 3.5 million tonnes global production deficit in 2020/21. This is a sizable increase from their last estimate of a deficit of just 724k tonnes. They now put total production at 171.1 million tonnes. They have lowered Thai, Indian and EU production by 500k tonnes each while increasing their global consumption by 400k tonnes to 174.60 million tonnes. They have put total Brazilian production at 39.8 million tonnes but suggest the next harvest will be lower. Because of the earlier harvesting of the CS cane they have increased their surplus for 2019/20 to 1.9 million tonnes.

This morning saw a quiet opening with the market up around 12 points in early trading having opened unchanged. Prices are, currently, around 7-8 points firmer. So far the HK and KN are unchanged at +93 and +74 respectively. It is also a sleepy opening in London with the HK slightly weaker at +9.90 while the KQ is unchanged at +12.50. This morning the macro is positive with commodities higher mainly on the back of an continuing weakening USD. The BRL was firmer yesterday ending at 5.34. The market still looks positive and a return to the highs seen early yesterday could well be seen before long. However, the funds are probably close to their long position limit for the time being so whether they have the ability to buy more in the short term is open to question. Nevertheless, producer selling is also limited and very much on a scale up basis. End-users remain under-priced which should add decent support to the market.

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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