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Sugar Market Report for 9 June

Good morning,

The market rocketed higher yesterday as, apparently, the confirmation of El Nino developing spooked the shorts and encouraged the longs. The market had opened 1 point lower but soon started to improve making good gains throughout the rest of the session with a couple of buy stops triggered as the highs of the previous session were breached. Excellent on close buying was seen suggesting some funds were re-instating longs sold over the past fortnight. The market improved another 20 points during the post-settlement period to end at its highest level since the 30th May. The structure improved as the NV surged 13 points to end at +39 while the VH jumped 7 points to finish at +21. It was a similar situation in London with the weakness seen earlier in the week a distant memory. The QV improved to +7.30 while the VZ was also firmer at +8.20. The VV WP improved slightly to end at 128.40 while the VZ WP finished lower at 120.20. The view that El Nino was the cause of the rally seems a bit far-fetched given the news of it developing has been in the market for a couple of months. The market was already higher before the US forecaster CPC announced their update but it did appear to trigger some significant short covering and, perhaps, some end-user pricing panicked into buying as prices rallied strongly off the lows. The final trading volume was exceptionally high at just under 350k lots boosted by the on-going fund roll with spread trading at 74% of the total.

The US Climate Prediction Center reported yesterday that El Nino has emerged and is likely to continue to strengthen into the Northern Hemisphere winter. At its peak, the chances of a strong El Nino are unchanged from their last prediction in May when they put the chances at 56% between November and January and an 84% chance of exceeding moderate strength. As traders are all well aware El Nino conditions can cause dry weather in Asia and wet weather in South America. Therefore, it could impact on the Indian and Thai monsoon and the Brazilian CS harvest. However, it seems unlikely to develop sufficiently to have any major impact on the Indian monsoon which will be over well before the winter. Nevertheless, it could impact on the latter stages of the Brazilian CS cane crush with rain curtailing field operations similar to last season. Indeed some rain is forecast over the next few days which may have an impact. Of course, El Nino could last well into next year and may even impact on the 2024 monsoon.

This morning the market opened 22 points firmer and around the last traded prices yesterday. Currently, prices are trading 28 points higher. The NV is 1 point weaker while the VH is unchanged. In early London trading the QV and VZ are both around unchanged at +7.30 and +8.20 respectively. This morning the macro is mixed with crude still down after its significant drop yesterday, softs mostly higher and grains/soya mixed. The USD Index is firmer and the BRL ended unchanged yesterday (Brazilian holiday) at 4.92. The market looks strong and likely to improve further. Much of the strength appears to be based on weather concerns which have not materialised as yet. Potential receivers of the N-23 are looking to squeeze out caught shorts and with very limited selling above the market the flat price and front spread are likely to strengthen.

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.

 © 2023 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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