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Sugar Market Report for 12 January

Good morning,

The market saw a tentative recovery yesterday after falling nearly 180 points since just before Christmas but remained within the previous day’s range bar by one point. The market had opened 12 points firmer after the market had pulled off the lows the previous session. Prices did dip slightly but it was not long before more short covering and some speculative fresh buying appeared taking prices up another 20 points by the time US traders got to their desks. The market then dipped back to opening levels on some late fund selling but it soon dried up and prices resumed their improvement to hit the highs shortly before settlement. Some late day-trader liquidation saw prices slip from the highs but ended up on the day for the first time in four sessions. The HK improved by 4 points to end at +28 while the KN jumped 9 points to end at +17. In London the structure continued to strengthen with HK improving over $1 to finish at +6.80 while the KQ was also stronger at +6.40. This meant the WP also improved again with HH WP pushing above 90.00 for the first time for several months. The KK WP also improved to settle at 89.90. It was somewhat inevitable that prices would improve once the heavy fund selling subsided which proved to be the case. However, it was not entirely convincing with some analysts seeing further scope on the downside to find some decent physical off-take.
One of the consequences of the recent fall in prices is that Indian sales have completely dried up not helped by a strengthening rupee. Indian mills can get better prices in the domestic market currently. Mills sold aggressively above 20 cents back in October and November and are thought to have concluded around 4 million tonnes of sales. As the current harvest progresses it is likely domestic prices will drop but unless world prices improve they will be caught and stocks will build. It was also announced yesterday that the WTO announced that India had lodged an appeal with the appeals panel in the dispute regarding India sugar subsidies. This was expected and mean the dispute will drag on for a long time yet. Given India is not offering any subsidies this season it will have little impact for the time being.

The analyst and consultancy, CovrigAnalytics, said in a report that Chinese sugar imports will remain low despite the recent drop in raw sugar prices. Sugar prices in China have weakened and freight rates remain high. China imported around 6.7 million tonnes last season well above their existing structural annual deficit of around 5 million tonnes so are in no hurry to buy again. Nevertheless, if prices drop towards 17 cents they may well be tempted to enter the market.
Unica will release Brazilian CS harvest data for second half of December at 14:00 (London time) today. Given the mills only produced 19k tonnes of sugar during the first half of December it is likely production will be negligible especially as it has been raining hard and the vast majority of mills have ceases operations. 

This morning the market opened 8 points firmer before improving another 6 points to break above the recently formed double top at 18.20/21. Currently, prices are back at opening levels in thin volume. The HK is a couple of points firmer at +30 while the KN is 1 point stronger at +18. In early London the HK and KQ are virtually unchanged at +6.70 and +6.30 respectively. The macro is mixed this morning with crude slightly firmer while grains are mixed to slightly lower. The USD Index is around unchanged while the BRL improved yesterday to end at 5.58. Assuming the macro does not deteriorate significantly it is likely the lows seen on Monday will not be tested for the time being. However, it is likely analysts will start to make predictions regarding total Indian and Thai production before too long in addition to fresh predictions for the Brazilian CS cane crop for next season which will start in April. Despite the drop in prices recently it has not seemingly unearthed a lot of fresh physical buying.

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.

 © 2021 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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