Written Commentary
Good morning,
The market dropped to a new low for the recent move yesterday remaining in the negative column all session having hit its lowest level since 12th May. The market had opened 7 points lower leaving a chart gap between 18.84 and 18.81 on a distinctly negative macro picture. The market continued to fall to the day’s low mid-morning. After decent support was found at 18.60 prices did improve back to opening levels but it was short lived with prices soon dropping back to the lows before improving a bit in front of the close. The last day of the fund roll saw another good trading volume as the NV improved despite the flat price weakness gaining 5 points to end at -15. However, the VH weakened again to a new contract low of -44 and eventually settled down 2 at -41. In London the spot month continued to remain firm actually ending slightly higher on the day. The QV improved to +27.30 while the VZ was also slightly firmer at +17.00. The WP ended the session virtually unchanged with the VV WP at 122.50 and the VZ at 105.50. It was of no great surprise the market fell again yesterday. The macro was the main reason as the USD soared on continuing inflation concerns and all markets weakened ion a general risk-off attitude by traders. Additionally, the prospects for sugar production in Brazil improved somewhat with the release of the Unica report on Friday plus the potential for burgeoning increases in production in Thailand and Indian next season not to mention the records Indian production this season.
The Brazilian Senate approved the main text of the bill for the capping of the ICMS state tax late last night after much debate. The bill establishes a ceiling of around 17% on fuel, communications and public transport. The proposal can still be altered by amendments to the vote and may not lead to lower fuel prices but probably does cap them.
Brazilian sugar exports for May were 1.58 million tonnes compared with 2.48 million tonnes in May 2021 the Brazilian government reported yesterday. The drop was expected given the lower production last season.
This morning the market opened unchanged but soon came under selling pressure falling quickly to the lows of yesterday. Currently, prices are 7-8 points weaker. The NV is 1 point firmer at -14 while the VH is a couple of points weaker at -43. In early London trading the QV is weaker at +24.70 while the VZ is unchanged at +17.00. The macro is slightly better this morning after the losses of the past two sessions. The USD Index is weaker having hit its highest level since December 2002 yesterday. The BRL unsurprisingly weakened to 5.10 yesterday. The news from the Brazilian Senate that the capping of the ICMS tax was in the market so should not have a huge impact on prices. Perhaps a case of sell the rumour buy the fact? Nevertheless, the macro headwinds suggest prices are not going to improve too much for the time being especially with the bearish fundamental backdrop. Some support should be found from 18.60 but new lows for the lows for the move still look likely with the downside target around 18.30 the lows of May.
Contact the ADMISI Sugar Desk team:
Phone: +44(0) 20 7716 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.
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.
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