Raw sugar futures have drifted lower over the past month as the excess global supply of raw sugar weighs further on prices. Prompt October19 contract succumbed to the pressures, making life of contract lows below 11 USc/lb. With the market well supplied through Q4 2019, analysts are predicting Indian exports will hit the global market through the first half of 2020. To process this, the market would need to be trading in a higher 12–13 USc/lb range, incentivising Indian exports against the domestic market. With Brazil continuing to maximise ethanol output over sugar, the market is wary of a potential swing back to sugar production. Looking ahead, we remain cautious of the ongoing macro environment, recognising that the influence these forces have throughout markets can be costly (for example the Saudi oil attacks).
A generally positive month for the AUD, trading back toward USD 0.69 on a weaker USD and sentiment around the ongoing trade discussions. With US/China trade talks set to resume next month, not many believe this discussion will provide any relief to the struggles of the US economy. US manufacturing data has remained weaker, signalling the overall health of the US economy is continuing to feel the pressures of the trade war. Locally, the RBA looks on track to cut rates again in 2019. Q2 GDP results and the latest employment figures (further weakness in the labour market) were well below the RBA’s forecast figures. Moving forward, we expect the AUD to come under further pressure again as the incoming trade talks resume and the RBA is pushed further to cut interest rates through downside risks to growth, employment and inflation.