The slide continues as raw sugar futures fell to 13-month lows on Friday night (15.01 USc/lb). In a week highlighted by an announcement of an import tariff in China, some unfavorable weather in Brazil and a cut to gas prices, it remains difficult to have a constructive view on sugar. Petrobras lowered gas prices on Friday in an attempt to regain market share. Announcing a 5.4 per cent cut to refiners, less is expected to be passed to consumers at the pump. Ethanol prices and parity is expected to have fallen below 14 USc/lb. Despite heavy rains in the previous week, dry weather has returned to stifle progress made. The latest UNICA report was released as expected (38.5 mmt of cane crushed to 2.1 mmt of sugar) for 1H May. From a technical and fundamental aspect, the odds are stacked against sugar. In the short term, we expect a test of new support levels as the walls continue to build.
Time spent above USD 0.75 was cut short twice over the past week. Commodity weakness and a downgrade of China’s financial strength by Moody’s saw the AUD back to a low USD 0.74 handle. OPEC officials agreed to cut supply of 1.8 million barrels a day for a further nine months, seeing the AUD dip back below USD 0.75. A miss on expectations for higher volumes for the nine-month supply cut aided downside pressures. Short term, the AUD looks comfortable in the USD 0.74–0.75 range. US data later in the week will test the AUD support near USD 0.74, with expectations for the USD to rebound somewhat.