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Sugar Market Report for 20 December

Good morning,

The market took a tumble on Friday as concerns over the swiftly spreading Omicron variant continued to spook the markets with nearly all markets down on demand concerns. The market had opened 5-6 points lower before quickly dropping on long liquidation and fresh selling dropping another 20 points in the next hour. Prices then settled into a 10 points range until shortly after US traders got to their desks when prices slipped lower again only finding support at 19.00 cents. Prices then held in this lower range until the close when some light day-trader short covering saw prices pull some 10 points off the lows. Nevertheless, it was a weak close and the lowest since 3rd December when prices were beginning to pull off the Omicron inspired collapse. The HK improved 3 points to end at +39 while the KN was 4 points stronger finishing at +32. In London the HK was a tad firmer at +3.20 while the KQ ended slightly weaker at +4.50. This saw the HH WP end barely changed at 76.70 and the KK WP at 82.10. Sugar continues to closely track the macro and, more especially crude which dropped Friday on Omicron concerns. Fundamental factors are taking a back-seat at the moment although Indian sugar production and Brazilian rains are also weighing on prices.

The COT report as of the 14th December showed the funds/specs increased their net long position by 34,518 to 164,700 which was probably rather more than market expectations. The non-commercials increased their net longs by 29,608 to 127,537 as fund managers cut recently established shorts and re-bought liquidated longs which, in hindsight they may regret with prices dropping back over 60 points since the report. The commercials increased their net short position by 32,643 to 347,114 as trade sold into the rally and liquidated longs. The Index funds cut their net long position by 1,875 to 182,412. The recently established fund longs may come under pressure to liquidate if the market continues to fall.

India sugar production, as of the 15th December, hit 7.5 million tonnes which is a record for the middle of December and  suggesting the expected total of 31.5 million tonnes is still on course to be achieved. Indeed it now seems possible that the total may well top this level. The planted area for cane is increasing due to good rainfall with better yields from new varieties.

The Thai harvest in now underway having started on the 7th December. It is very early to make any assessment of the total production. Only 3.2 million tonnes of cane have been cut so far with a total sugar production of 227k tonnes. The sugar content is, currently, similar to last season.

This morning the market gapped lower opening below 19 cents some 6 points down before swiftly dropping another 9 points all on a negative macro picture. Prices are, currently, around 28 points lower. The HK and KN are virtually unchanged at +39 and +31 respectively. In early London trading the HK is firmer at +3.80 while the KQ is valued unchanged at +4.30. As mentioned above the macro is a negative picture this morning with most commodities and equity indexes lower. Crude is over 3.5% lower and the USD Index virtually unchanged. The market continues to be gripped by the macro and its hold will continue probably into the New Year with little consideration for the fundamental picture. Nevertheless, some would argue that global production looks set to increase this season from earlier predictions cutting the expected deficit especially as there is now concern over demand. In the short term the market looks destined to drop further but support at the lows seen in early December at around 18.50 would seem likely to hold but it is a very fluid situation especially with the run up to the holiday period.

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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