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Sugar Market Report for 17 January

Good morning,
Friday saw an inside day as the market reversed most of the losses seen the previous session as more consolidation was seen after hitting five month lows earlier in the week. The market had opened 1 point firmer before quickly improving another 10 points. However, early interest was limited and prices soon slipped back into the negative column. Reasonable support noted at 18 cents stopped any further erosion in prices with prices remaining within a 15 point range until mid-afternoon when prices started to pick up as the macro also started to improve. Prices continued to climb hitting the highs late in the session with some late liquidation by day-traders trimming the gains. However, the trading volume was limited falling to 87k lots in total. The HK improved just 1 point to end at +23 while the KN was also 1 point firmer at +17. In London it was also quiet with little change on the front two spreads after the strengthening seen earlier in the week. The HK ended slightly weaker at +9.30 while the KQ was firmer at +8.60. This meant the WP marginally improved as well. The HHWP ended at 98.90 while the KK WP finished at 94.70 but there was muted interest with no block trades. The market appears to be trying to consolidate at the lower levels with support building at and below 18 cents.

The COT as of the 11th January saw some big changes after the 115 point collapse in prices during the reporting period. The Funds/specs cut their net long position by a massive 58,874 to 50,858. The non-commercials cut their net longs by just over 50k lots to 38,068 their smallest net long position since June 2020. This was a combination of long liquidation and fresh selling as the funds bet that prices have further to fall. The commercials cut their net short position by a huge 65,927 to 230,136 as trade bought back shorts and end-users priced in decent volume. The pressure has now shifted off end-destination who were, until the sell-off were poorly priced. The Index funds cut their net long position by 7,553 to 179,278.

It was announced on Friday that the UK’s farming and Environment ministry have issued an emergency temporary authorisation for the use of neonicotinoid pesticide treatment on the 2022 sugar beet crop due to the risk posed by virus yellows which is spread by aphids. The lifting of the ban only applies to England. The ministry issued some conditions including a prohibition on any flowering crop being planted in the same field where the product has been used with 32 months of a treated sugar beet crop. England joins several other EU producers in being allowed to use neonicotinoid sprays including the largest EU producer France.
The analyst Green Pool reported on Friday that they had cut their forecast for China’s sugar production in 2021/22 to below 10 million tonnes and things could get worse if La Nina causes frost. The main reason for the drop in production is the drop in beet production to 887k tonnes which is over 40% from last season. Cane production is down just 1%.

Today NY is closed for the Martin Luther King day holiday. London is open but will close one hour earlier at 17:00 (London time). This morning London opened $1.4 firmer before improving another $4 on some early market on opening buying meeting with limited scale up selling. Currently prices are trading around $4 firmer. The HK is a tad weaker at +8.90 while the KQ is firmer also at +8.90. It is likely to be quiet today with NY closed. The macro is mixed this morning with crude around unchanged and other commodities mixed.

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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