After spending much of Q2 below 12 USc/lb, prompt July futures have surged back towards 13 USc/lb.
Brazil continues to produce more ethanol over sugar, despite weaker WTI oil prices, with stronger demand for ethanol keeping ethanol prices buoyant.
The question remains if and how much sugar India will export this year. If the Indian government can solve the supply glut, then prices are expected to come under pressure again.
Macro/currency commentary
A busy few weeks for the AUD as the Reserve Bank of Australia (RBA) cut interest rates at its latest meeting and indicated more cuts are on the way in 2019.
This week we saw the US Federal Reserve leave rates on hold at 2.5%.
The AUD continues to trade near USD 0.69. Topside resistance is expected if the market returns toward USD 0.695.
Last week’s Commitment of Traders (COT) report surprised somewhat, with non-index specs showing a net short 126,000 lots, slightly more than anticipated.
Despite the positive backdrop for prices, led by non-index specs, the rest of the week has seen the market erode much of those prior gains.
Softening physicals and white premiums have pushed more producer pricing into raws.
Macro/currency commentary
Local unemployment data gave the AUD a leg up to fresh one-month highs at USD 0.7168, but gains were short lived as the USD clawed back losses on the back of some second-tier jobs data.
As the week draws to a close, the AUD looks set to close on a 71-cent handle.
The AUD continues to gravitate around USD 0.71, despite positive local employment numbers.
Raw sugar futures continued to slump as the new prompt May19 contract finished the week down 5.1%.
The Indian Government raised the domestic price of sugar just over a week ago, as the mills’ cries for assistance seem to have been answered. Cane farmers arrears continued to grow, prompting further assistance from the government.
It is yet to be seen whether the subsidies will continue to encourage farmers to grow cane, despite the uncertainty of payments.
Macro/currency commentary
The AUD struggled to slow USD momentum over the back of last week, closing the week below USD 0.71.
Newswires were highlighted by US President Trump extending the tariff deadline with China, whilst reports out of the UK suggested Prime Minister Theresa May was planning to delay Brexit to delay a no-deal scenario.
A quiet start to the current week as the AUD was back above USD 0.71. Comments from US President Trump, suggesting the USD is too high, helped the AUD start on a positive note.
Sugar prices rebounded further into higher territory over the past week.
The US Federal shutdown stopped the weekly Commitment of Traders report, however, respected market analysts presume specs sit at a comfortable net short position.
Many are still assuming Indian production will underwhelm, which may prove to be incorrect. We will be carefully monitoring Indian production and exports, until we see further developments on levies.
Macro/currency commentary
Another strong week for the AUD, pushing back toward USD 0.72, with the US Fed’s reluctance to hike rates in the near-to-medium term.
Many still expect the Fed to hike twice in 2019, however, no change is expected until the second half of the year.
Global trade risk sentiment began to build positively over the weekend—Chinese economic officials are expected to progress with discussions in Washington next month.
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