14 December 2016

Weekly Market Report 14 December 2016


Recent price action for raw sugar futures have been highlighted by a mass reduction in speculative net longs. The market has seen specs lighten up overweight positions immensely, with the belief, there is more room fall. A lack of bullish enticement has made the market more unattractive for user longs toftenter.

An announcement by Petrobras (Brazil) to raise fuel prices last week temporarily quelled concerns. Prompt, March-17 trading up toward the all-important 200 day moving average (20 USc/lb) before retracing gains in the preceding days. Looking ahead, this suggests that the price, at which Brazilian Mills would favor ethanol production over sugar, heightens in addition to a technical floor level.

With fundamentals lacking forward drivers, we remain conscious of the macro environment sugar is susceptible to. Commodities have and continue to improve and President Trump’s proposed policies have been fast tracked before he has officially been sworn in. The FOMC meet this week ahead of what is shaping up to be a December rate hike. What this means for sugar and A$/tonne returns will rely on commentary surrounding policy decisions into 2017 and beyond.


The AUD has been largely unchanged across the past week despite some weakness to the Italian referendum result and disappointing local data. The resignation of Italian PM, Renzi, saw the USD strengthen versus Euro and AUD respectively. As expected, the RBA kept rates on hold with little forward guidance as to policy decision making heading in to 2017. And local Q3 GDP came in much weaker than expected, helping the AUD make week lows (0.7417).

Looking ahead, the biggest market driver to watch will be the FOMC rate announcement (Thursday morning). Market consensus suggests, the FOMC will pass down their second rate hike in 10 years, pricing 95% chance of a rate hike. As this decision is largely priced in, particular focus will be on the FOMC’s commentary and dot plots.