The prompt March21 raw sugar futures contract settled during the month at an average rate of 15 USc/lb.
A few tests of 15.50 USc/lb failed to kick on, as a 15 USc/lb floor looked stable.
On the fundamental side, India continued to hold most of the market’s attention. Subsidised or not, it is expected that India will export sugar to support tighter global trade flows through 1H 2021.
Macro/currency commentary
A strong month for the AUD, with trading ranging from a USD 0.6991 low to a high of USD 0.7373 toward the end of the month.
The US Presidential election came and went — complete with the expected fireworks. While a clear win for Democratic candidate Joe Biden, it was not the landslide predicted by most polls.
Market attention moved back to COVID-19, as Moderna and Pfizer registered successful trials of vaccines and Oxford University announced a successful trial of a vaccine developed in conjunction with AstraZeneca.
The RBA cut interest rates to 0.1% as widely expected, with the commentary clearly underlining a lack of intent to move to negative interest rates unless widely adopted in other parts of the world.
Raw sugar futures chopped higher over the past month as the Mar–21 contract achieved life-of-contract highs at 16.75 USc/lb off the back of US dollar weakness.
Fundamental news remained quiet following India’s export subsidy announcement in December. At least two million tonnes has been contracted for Indonesia, while Indian millers will continue to seek out homes for the remainder of the proposed five million tonnes of exports.
Thailand’s crush is lagging behind the same period last year, as anticipated by the market.
From a fundamental perspective, all eyes will be on the Brazil crop in the coming months.
Macro/currency commentary
The AUD has been well supported in the last month by a weakening USD, and has seen fresh 33-month highs at USD 0.7816.
Ever-increasing COVID-19 numbers and political unrest have weighed heavily on the US dollar and economy.
Investors have moved money from the typical safe havens of the USD and gold, towards ‘riskier’ assets such as the US equity market and AUD.
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.
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