Indicative ICE 11 Prices
*These figures are indicative of available ICE 11 prices as at 22 July 2019 and reflect the weighted average AUD/mt price. The prices have been adjusted to include Over-the-Counter margin fees charged by banking institutions and so may differ from daily prices quoted by the ICE #11 Exchange and/or other Marketers of Growers’ Economic Interest in Sugar. Values also do not account for any adjustments resulting from local Grower-Miller pricing arrangements.
Weekly Market Overview
By QSL Trading Manager Matt Page
SUGAR
Last week was a precipitous week for sugar with one way action driving prices almost 80 points lower. Sugar price movements for the week can be seen in the graph below.
• What happened this week:
o A monster 800k tonne delivery for the August London Whites expiry (the White Sugar futures contract is used as the global benchmark for the pricing of physical white sugar) confirmed what many had feared after the JUL19 raw expiry – that there is indeed plenty of sugar struggling to find a home in the physical trade flows.
o Maharashtra has experienced weaker oil and grain prices, along with some much needed rain in coastal areas. This has provided a bearish backdrop.
o Brazil Real Equals (BRL) has remained firm around 3.75, although this is largely irrelevant with prices already so far below ethanol parity.
• India: The Indian Sugar Milling Association announced that it anticipates a virtual reproduction of this year’s cane/sugar subsidy framework. Although not entirely unexpected, what did surprise the market was the comment that it would prefer it applied to 8Mmt, as opposed to the 5Mmt as it was available this year. Although it is unlikely to be applied on the full volume, it will nonetheless weigh heavy on the market.
• Commitment of Traders: Bearish sentiment gave specs plenty of reason to reload their short position, with 112k lots as of Tuesday and likely closer to 120k given the ensuing price action since.
CURRENCY
A reprice of U.S. Yields saw the DXY (USD Index) down to 96.7 on Wednesday as the AUD traded towards the upper end of its three month 0.69c – 0.71c range. This is shown in the graph below.
• While a 25bps cut in the U.S. cash rate on July 31 appears to be the likely scenario, the commentary coming out of the U.S. Federal Reserve from various members is contradicting in its essence. While Wednesday saw dovish comments that drove equities higher and the USD lower, Friday brought about a full 360 degree change, with comments that the discussions of Wednesday were ‘academic’, and not a consideration for the upcoming decision. Confused? The market sure was – with DXY trading back above 97 and AUD up 40 points.
• The initiation of the first Federal Reserve rate cut since the GFC should provide a backdrop for a firmer trading environment for the AUD going forward. However, with geopolitical and trade tensions still at elevated levels, diminished risk sentiment and a still weak domestic economic picture, any potential overheating in the Aussie Dollar should be contained.
• The economic calendar is fairly light both sides of the Pacific this week with U.S. Jobs and PMIs the only releases worth noting. Expect the AUD to tread water around 0.7050 until the Federal Reserve meet next week.
For more sugar market information, please read the latest QSL Market Snapshot, available here.
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