Sugar Market Report for 20 September

Good morning,

Friday saw prices drop back into the range seen earlier in the week as a stronger USD and reported sales from India weighed on prices. The market had opened 3 points firmer before improving a little more on opening buying to hit the highs of the day. However, this buying soon dried up with prices soon dropping into the negative column. There was a slight pull back as US traders got to their desks but the sell-off soon resumed with prices hitting the day’s lows mid-afternoon. Prices did manage to pull off the lows but remained within a narrow 14 point range through to the close. The trading volume dropped considerable as the fund roll finished – just under 111k lots traded on the day. The VH slipped 4 points to end at -68. The HK ended 3 points better at +57. In London the ZH slipped over $2 to end at -4.90 while the HK was also slightly weaker at +4.80. The HH WP ended at 67.00 while the KK WP was a tad firmer at 70.20. The market seemed to have little desire to push higher and with negative macro and no real change in the fundamental picture prices eased lower with the funds showing little desire to reinstate longs after their liquidation earlier in the week.

The COT as of the 14^th September showed the funds/specs cut their net longs by 22,143 to 209,459 which was probably in line with expectations given the market dropped just over 90 points during the reporting period. The non-commercials cut their net longs by 23,826 to 165,644 as expected with good fund liquidation seen. They are probably currently around 170k lots net long. The commercials cut their net shorts by 25,451 to 389,498 as the trade took profits on shorts. The index funds cut their net longs again down by 3,308 to 180,038.

Indonesia is to establish a holding company for state-controlled sugar mills and aims to cut imports and increase production of white sugar to 1.8 million tonnes by 2024 it was announced by the CEO, Mohammad Abdul Gani, earlier today. The increase in local production is to reduce imports, save on forex reserves and reach food self-sufficiency. Around $1.4 billion will be invested for this expansion including new mills.

This morning the market opened 18 points lower mainly on a negative macro picture and some follow-through selling after Friday’s weak settlement. Prices then dropped another 12 points before recovering much of the early losses. Currently, prices are around 9-10 points lower on the day. The VH and HK are unchanged at -68 and +57 respectively. In early London trading the ZH is a tad weaker at -5.10 while the HK is weaker at +4.00. The macro is a negative picture this morning with crude around 1.5% lower and the USD index up at 93.40 its highest level in nearly a month. Most other commodities are lower adding to the bearish tone. Sugar prices have dropped back into the range seen at the beginning of last week with the later strength appearing to be just some short covering. While it would seem unlikely prices will drop considerably from current levels the up-side also looks capped. Therefore, a period of consolidation maybe seen with the bias on the downside if the funds decide to liquidate more longs. This could happen if the 19.31 levels is breached.