Good morning,
The market rocketed higher yesterday reaching its highest level since March 2012 as shorts continued to be squeezed and very limited producer selling. The market had opened 9 points weaker but soon found support near the lows of the previous session. It was very much the calm before the storm and the market remained range-bound for the rest of the morning but finding support at around 24.30. However, just after US traders got to their desks prices started to improve with continuous buying pushing prices higher with only limited selling found. The 11 year highs were soon breached which triggered further buying and the 25 cent level was also soon pushed through. Prices reached highs on the close before gaining another 12 points post-settlement. Interestingly, the KN actually dropped 1 point to settle at +51 while the NV ended 4 points firmer at +34. In London it was quieter with the gains more muted. The structure improved with the QV ending at +17.20 and the VZ at +15.70. However, the WP weakened with the VV WP down over $4 at 140.60 and the VZ WP $4.50 lower at 124.90. Yesterday’s large improvement has left many scratching their heads as to the reason. Lower Brazilian planted cane area may have been one trigger but it would appear it was a continuing squeeze of end-users who remain poorly priced. Burgeoning costs of storage and freight has seen many trading hand to mouth. There is still a lot of uncertainty on production prospects over the coming months not least the Indian monsoon. Currently, some forecasters are suggesting rainfall may be below the long-term average but what extent is, obviously, very uncertain at the moment. The more poignant question will be coverage and that will not be confirmed until much later in the year. However, for the time being, the bulls are in charge and dictating proceedings.
The Brazilian Government agency, Conab, reported yesterday that they see total sugar production for the just finished 2022/23 season at 37.04 million tonnes from 610.10 million tonnes of cane. However, they did report that the planted area fell to its lowest level in 12 years mostly because farmers switched to other crops such as soybeans and corn. Total planted area estimated at 8.29 million hectares 0.4% less than the previous session and lowest since 2011. Of course, with soaring sugar prices many farmers may be rethinking their planting strategy going forward.
This morning the market gapped higher on the opening at 37 points higher which may have been some panic short covering. However, prices immediately dropped back quickly filling the gap left on the opening and then continued to fall. Currently, the market is 4 points weaker. The KN is 2 points firmer at +53 while the NV is 1 point better at +35. The K-23 OI dropped to 92,773 lots with another 39,253 lots traded yesterday continuing to suggest deliveries will be limited. In early London trading the QV is a tad weaker at +17.10 as is the VZ at +15.30. For what it is worth the macro continues to be negative although yesterday’s poor picture had no impact on sugar. Most commodities are lower while the USD Index is firmer. The BRL ended unchanged at 5.04 yesterday. It is difficult to know what happens next in sugar. Logic suggests some correct should be seen but many have been saying that for some time now. The market remains over bought and, perhaps, last night’s late jump and today’s spike higher will prove to be the highs for the time being with any enforced buying completed.
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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