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Sugar Market Report for 10 February

Good morning,

The market rallied yesterday ending at its highest level in 10 days aided by strong macro and buying of the front spread. The market had opened unchanged but soon dropped back into the negative column. However, this proved to be the lows of the day as prices soon started to improve. This improvement continued through most of the session with prices swiftly breaking above the double top at 18.30 and powering to their highest level since 26th January. Eventually, some long liquidation was seen which pulled prices off the highs but it was a positive close. The HK continued to gain momentum ending 14 points firmer at +50 after soaring to +60 as the flat price hit the highs. The strength in the front spread was probably two fold as potential receivers of the H-22 start to squeeze shorts while the fresh fund sellers noted over the past couple of weeks were forced to cover. The KN ended 2 points firmer at +18. In London the HK slipped lower with two sessions before expiry ending down just over $5 at +11.50. The OI dropped 2,562 to 15,028 lots with another 8,369 lots traded in H-22 yesterday. It now looks as if the total delivery will be around 500k tonnes. The KQ was only marginally higher ending at +7.80. The HH WP understandable dropped to 95.80 while the KK WP was firmer at 95.30. The trading volume was over 380k lots but nearly 80% was spreads as funds continue to roll positions. Yesterday’s rally was mainly triggered by a surge in prices right across agricultural commodities and more specifically Softs with NY coffee hitting its highest level since September 2011 and NY cocoa hitting its highest level since November 2020. While fundamentals are the main driver in coffee they are not so strong in sugar and cocoa and, perhaps, suggests fund managers are seeing softs as a buy with inflation increasing and other markets near their highs. Traders will also remember that the HK went to over a 100 point premium before the expiry of the H-21 last year.

There is no particular fresh fundamental news recently. The India and Thai harvest continue apace with half the crush done. It continues to rain across much of Brazil’s CS and the forecast indicates more over the next 10 days which will continue to boost the cane in front of the 2022/23 harvest that will start in April. Sugar production in Russia from beet may amount to 5.65 million tonnes according to the ISO including production from molasses. This is some 7% higher than last season.

This morning the market opened unchanged but soon slipped lower and to the levels hit post-settlement last night. Currently prices are around 9 lower. The HK is down 4 points at +46 while the KN is around unchanged at +18. In early London trading the HK is firmer valued at +14.00 while the KQ is unchanged at +7.80. The macro is positive again this morning with crude and most agri-commodities firmer. The USD index is unchanged at the moment. It is difficult to judge whether yesterday’s rally will continue. Much will depend on whether the funds will continue to buy. They have ample ammunition to buy but it is whether they see up-side potential in sugar. While most still see a relatively small production deficit for the current season Indian exports are filling the gaps and with 2022/23 being seen in a small surplus the up-side is probably limited at the moment.

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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