Following a more active Christmas period, raw sugar futures have stabilized in to a 20 – 21.50 USc/lb range. Further uncertainty around Indian imports and China stock releases have seen prompt March-17 comfortable in the range. Indian import requirements (1.5–2 million tons) have been countered by the potential for further stock releases by Chinese Government. Trade flows remain tight through Q2, with the outlook beyond Q3 constructive. Despite a delayed start, the current Thai harvest is doing well, with prospects for the upcoming Brazil crop positive also. Intuitively, our focus remains on tighter near-medium trade flows and a risk for higher prices to induce Chinese stock draw downs.
CURRENCY / MACRO COMMENTS :
Renewed strength into the New Year saw the AUD outperform through to the end of January. However, the new month and resilience at 77 cents recently holding the AUD to a 0.7650 handle. The end of January saw the Trump inauguration, which failed to provide the fire-works markets were expecting. The FOMC met, leaving rates on hold as the stalemate between Trump’s proposed fiscal policies and the Fed’s monetary policies remain in no man’s land – less hawkish than expected commentary assisting the AUD through 76 cents. More recently, the RBA left rates on hold, with an optimistic economic outlook and upbeat commentary by Governor Lowe supporting the AUD. The RBA expect inflation to return to target, albeit, slowly. Positive signs for the labour market, domestic growth and commodities should ensure the AUD is well supported around these levels going forward.