It was déjà vu yesterday as the market remained resolutely within the range of the previous four sessions in a narrow 18 point range. The market had opened 7-8 points firmer before climbing another 6 points over the next hour. However, prices soon fell away as the early buying dried up culminating in dropping back to unchanged as US traders got to their desk. Another attempt to push higher was then seen as the highs of the day were reached but, as the macro started to turn negative the gains failed to hold with prices dropping back into the negative column shortly before settlement with the market eventually finishing around unchanged in another day of uninspiring trading volume. The HK finished 1 point firmer at +40 while the KN lost 6 points to end at +34. In London the structure firmed marginally with HK ending at +4.00 while the KQ ended at +7.80. This meant the WP was also slightly firmer with HH WP at 77.70 and KK WP at 82.50. The market remains directionless at the moment with many traders seemingly closing their trading books for the year. Prices remain within the range seen since early August apart from the two bouts of fund liquidation the last triggered by Omicron concerns. All market continue to remain nervous of the new variant. As reported several times the variant appears to produce milder symptoms but it extremely transmissible which is the main concern.
After several years a World Trade Organisation panel has ruled in favour of Brazil, Australia and Guatemala in the trade dispute with India over sugar export subsidies. The three major sugar producers had alleged that India had broken WTO rules by providing farmers and mills with disproportionate support which allowed sugar to be sold on the international market with an unfair advantage. However, the WTO have only recommended that India comply with its obligations. India immediately said they would appeal against the ruling. The dispute is likely to continue as their appeal will probably not be considered for some time given the WTO’s Appellate body does not have enough judges to function. This dispute goes back to 2014/15 when India first introduced export subsidies as production grew well above domestic consumption. Somewhat ironically, this season India is unlikely to need subsidies to export given global prices are near 4 year highs. India’s ethanol policy may, in the long run, cut excessive sugar production and, therefore, the need for subsidies. The WTO’s decision will have no immediate impact and it could be several years before any conclusion to this dispute comes to an end.
This morning the market opened 7 points lower before immediately dropping another 15 points dropping to its lowest level for a week and below the recent support at 19.50. Currently, prices are around 20 down on the day. The HK is unchanged at +40 while the KN is another 2 points weaker at +32. In early London trading the HK has dropped to around +2.50 mainly on flat price selling pressure in the H-22 while the KQ is also slightly weaker at +7.20. The macro is a slightly negative this morning although USD Index is weaker. The early move today appears to be more than just a reaction to the macro and possibly points to some stale longs bailing out after the market failed to push through 19.90. There is also a growing feeling that the global deficit for the current season may not be as great as previously estimated as production prospects improve in India, Thailand, Eu and other producers. The rain continues to fall across Brazil’s CS improving soil moisture and, therefore, prospects for their next harvest. Additionally, there are also concerns that demand may not improve enough to cause any significant supply tightness as Indian sales plug gaps and have sufficient stocks if needed.
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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