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Sugar Market Report for 4 August

Good morning,

Yesterday saw prices make a new low for the recent move before gaining 50 points only to fall back to settle just above unchanged. The market had opened 2-3 points weaker before dropping another 18 points on the back of a negative macro picture. However, there was little follow through selling and prices soon recovered back to opening levels. The market then settled into a narrow 12 point range for the rest of the morning with trading volume very poor. However, early afternoon saw prices start to improve gaining 25 points to hit the day’s high late afternoon. The buying, which appeared to be fund related, eventually dried up with prices ultimately falling back into the negative column. A late bout of day trader short covering saw prices improve to settle slightly higher on the day. The VH lost another couple of 2 points to settle at -57 while the HK also ended 3 points weaker at +85. In London the VZ improving again gaining nearly $2 to end still at a sizable discount of -17.10. The ZH finished unchanged at -9.00. This saw the VV WP  improve to 53.20 but still below any refiners levels. The HH WP slipped slightly to end at 66.70. The market continues to seem to react to the macro more than taking any notice of fundamental news but seems to have stabilised after swiftly falling from the highs seen on Friday. While the gains yesterday were not maintained this is more a consequence of lack of trading volume with total just over 103k lots.

The Brazilian CS crop woes continues to be the main focus at the moment. The dry conditions coupled with frost damage incurred a week ago have seen analysts start to lower their total sugar production estimates. Wilmar remain the most pessimistic. It was several months ago that they estimated total production may only reach 31 million tonnes. They have now downgraded even further seeing just around 28 million tonnes produced from less than 500 million tonnes of cane. StoneX remain more positive seeing total production falling to 34.6 million tonnes. This is just over 1 million tonnes down on their last estimate with 541 million tonnes of cane crush. However, they did not rule out further cuts to their current expectations. Wilmar also said that the cold weather may impact on next season’s production as immature cane is more susceptible to frost damage. The weather over the intra-season will, therefore, be critical.

This morning the market opened 10 points firmer before slipping a touch. Currently, prices are around 5-6 points higher. The VH and HK are both 1 point better at -56 and +86 respectively. In early London trading the VZ is valued a tad lower at -17.50 while the ZH is a little firmer at -8.70. The macro is a more positive picture this morning with most agricultural commodities higher although crude is a tad lower. The UDS Index is also slightly lower. The markets have come under renewed pressure recently due to concerns over growing cases of the Delta Covid variant across Asia and especially China. The general lowering of expectations for total sugar production for Brazil’s CS will continue to support the market but, it would seem, the heavy spot discounts are keeping a cap on the markets. There is also the knowledge that Indian sugar is available above 19 cents basis H-22 when demand is limited.

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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