Written Commentary
Good morning,
The market improved yesterday but the gains were muted compared to crude which corrected off its recent lows. The market had opened 6 points higher before slipping back to hit the lows of the day. However, it was not long before prices started to improve gaining nearly 40 points over the next hour and hitting the day’s highs as crude improved. Nevertheless, the chart gap up to 19 cents was never completely filled (high 18.97) with prices soon falling away. Prices continued to slowly descend despite the macro remaining firm. Some support was, initially, found at around 18.70 but, just before the close, prices dipped on day-trader liquidation closing in the bottom half of the day’s range. The trading volume was, again, poor with just under 68k lots traded in total. The KN and NV were, basically, unchanged at +8 and -7 respectively. In London it was a similar quiet story with KQ ending slightly weaker at +13.30 while the QV was firmer at +8.70. This meant the Kk WP continued to improve ending at 114.00 while the VV WP was unchanged at 92.20. The market appeared to finally de-couple from its close relationship with crude yesterday. While crude improved by 8% at one point yesterday sugar ended with just marginal gains. The bearish sugar fundamentals are beginning to weigh on prices while many traders remain on the side-lines as the Russian/Ukraine continues.
Indian sugar production continues to defy earlier expectations. As of the 15th March sugar production had reached 28.32 million tonnes. This points to a total production of a possible 34 million tonnes which would be a record production and put India as the largest producer for 2021/22. This would now suggest the estimated global deficit for the current season may now be fairly balanced. Total Indian stocks by the end of the season may be around 9.5 million tonnes allowing for more exports next season which will also see likely higher production in Brazil and Thailand.
The Thai harvest is slowly coming to an end but the tail could be long. As of the 14th March the total crush reached 84.75 million tonnes which is 28.5% higher than this time last year with sugar production reaching 9.44 million tonnes of sugar which is nearly 24% higher year on year. There is probably only around 6.5 million tonnes of cane left to crush so total sugar production could reach just shy of 10 million tonnes.
This morning the market opened 5 points firmer but soon slipped lower. Currently prices are unchanged on he day. The KN and NV are both 1 point weaker at +7 and -8 respectively. In early London trading the KQ is slightly firmer at +13.80 while the QV is valued around unchanged at +8.70. The macro is a mixed picture this morning with crude firm while grains are lower while soya complex firmer. The US dollar index is firmer as it attempts to correct after sharp sell-off on Fed interest rate rise. The BRL was firmer at 5.04 last night. The sugar market looks likely to remain quiet and could see an inside day. However, fundamentals point to lower prices at the moment so the support at 18.50 may be tested. This could trigger further fund liquidation which may see prices down towards 18 cents. However, with the Ukraine conflict far from over the uncertainty may keep prices within the range seen over the past three sessions.
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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