Written Commentary
Written by Howard Jenkins, Head of Global Commodities, ADM Investor Services International Limited
This week has been volatile to say the least. Initially, prices continue to rally reaching their highest levels since late February only to tumble as the macro picture turned negative as pandemic concerns increase again. The continuing silence from the Indian government regarding their export policy saw prices push above 15 cents and the front spread strengthen to a big premium. The market spent most of Wednesday trying to ignore the darkening macro clouds. However, since the opening on Thursday prices have tumble just over 100 points (as of mid-day Friday) as the funds start to trim their long positions.
With no announcements from India the market managed to wind itself up into a nervous frenzy culminating with the HK hitting 105 point premium. Suddenly, traders seem to have convinced themselves the world was going to run very short of raw sugar early next year despite Brazilian sugar stocks being nearly 30% higher than this time last year at the end of September. Chatter was that prices would have to rally further as the Indian export subsidy would be much lower than last season.
Despite this slightly contrived bullish fundamental picture for sugar the macro was starting to stutter as the feared ‘second wave’ of Coronavirus cases and fatalities increased as the Northern Hemisphere winter started to bite. As several major European countries imposed total lock-down again the financial markets started to drop which took crude and most other commodities lower. The risk-off attitude has seen the USD surge to month highs and sugar eventually succumbed to the inevitable dropping nearly 50 points on Thursday. Further fund long liquidation has continued today. Time will tell whether it is a timely correction or become a fund inspired rout.
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg
Phone: +44(0) 207 716 8598
Email: admisi.sugar@admisi.com
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