Good morning,
Friday saw an impressive reversal in prices. After ending 66 points lower on Thursday prices recovered 54 points after the macro improved as the US debt ceiling crisis lessened. The market had opened 12 points firmer but immediately dropped 24 points before recovering back to around unchanged all within the first 10 minutes of the session. The market then weakened again albeit rather slower. The lows of the day were hit mid-morning before a slow recovery was seen. The market became more volatile as US traders got to their desks with prices eventually seeing good buying returning to the market. Prices rallied over 90 points from the lows of the day to hit the highs of the day late afternoon before slowly subsiding through to the close settling just 12 points down from Wednesday’s close. The volume was relatively decent but well down on the previous day. Interestingly, despite the bounce in the flat price the structure was unchanged with NV and VH unchanged at +23 and +31 respectively. In London, the QV slipped $1 to end at +10.40 while the VZ was over $2.50 firmer at +15.60. The WP was also mixed with VV WP slightly stronger at 143.90 while the VZ was weaker at 128.30. The market appeared to shrug off the excellent Unica harvest data of the previous day and reacted to the improved macro picture as discussions on solving the US debt ceiling crisis made good progress. As was always likely to be the case the swift reversal met with limited resting selling which possibly exaggerated the move. Concern over the upcoming Indian monsoon still likely to keep the market on its toes for the time being.
The COT report as of the 23rd May showed that the funds/specs increased their net longs by just 2,280 as prices remained relatively range-bound during the reporting period. The non-commercials increased their net longs by 5,001 to 169,116 as they continue to remain quiet. However, Thursday’s price collapse did see some more aggressive fund liquidation although some lo0ngs were, probably, re-established on Friday. The commercials increased their net shorts by 1,843 to 361,881 as the trade were seen on both sides. The Index funds cut their net longs by 436 to 143,899.
As the Indian cane harvest comes to an end it would appear total sugar production will reach 32.8 million tonnes. This is well down from pre-harvest estimates of 36 – 37 million tonnes. However, this total is probably slightly higher than some had been predicting only a few weeks ago. As for next season much will depend on the monsoon.
This morning the market opened 1 point higher before falling back. Currently, prices are 7 points weaker. The NV is 5 points firmer at +28 while the VH is 1 point firmer at +32. In early London trading the QV is firmer at +11.00 while the VZ is also a little lower at +15.20. This morning the macro is slightly negative. Crude is lower as are grains/soya. The USD Index is firmer and the BRL ended at 5.03 yesterday. The swift and noteworthy bounce on Friday confirmed the strength in the market at the moment. It is likely prices will remain well supported certainly until a better idea on how the Indian monsoon is progressing. Forecasters have already suggested that rainfall in June may be limited and sporadic so a full picture will probably not emerge until August. In the meantime, the Brazilian CS harvest will continue apace and it is likely that production will be good with a very high sugar split. Currently, some rain across the region through to the beginning of June may hamper field operation slightly but drier weather will return later this week and should continue for, at least, 10 days although some rain is, again, forecast around 10th June.
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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