SBH21 Sell from 15.00 to 12.00
Sugar No11 has stalled its uptrend over the last 6 weeks and formed a range bound market between 15.00 and 14.00.
Indian News
The main fundamental reasons for this are the late subsidy announcements from India as they are currently subject to a WTO ruling which started November last year.
"Meanwhile, sugar mills in India have held back exports as they await news on government subsidies. The World Trade Organization (WTO) is expected to rule on the legality of India's subsidies to its sugar exporters sometime this month after Brazil and Australia raised objections to the WTO about the subsidies. The ruling by the WTO has been delayed from July due to the Covid pandemic." [Rich Asplund - Barchart - Thu Nov 12, 2:02PM CST] because of this many hedge funds took long positions and are now stuck bellow strong resistance hoping on the fact that the WTO will be harsh on India after the pandemic which in my opinion is unlikely. Furthermore India will be desperately trying to gain a favorable ruling as "Monday's data from India's National Federation of Cooperative Sugar Factories was negative for sugar as it showed that Indian sugar output as of Nov 5 was up +32.8% y/y at 425,000 MT."
Positioning of Funds and commercials
As of 3Nov, Current commitment of traders sits at:
This is the first time since the start of the uptrend in march this year that both manage money and non-commercials have reduced there long position in sugar showing the weakness of the market and the clear uncertainty of the market. Secondly commercials and producers have been hedging there position in favour of a market decline as the market is stalling. This uncertainty has created the opportunity where by most funds and commercials are waiting on the Indian news and to see if India will be allowed to take over the market share that Thailand has lost due to drought.
Brazil
Weather has been harsh in Brazil for the crop in the last 6 weeks "Maxar recently said that Brazil's sugar-growing regions had received only 5%-25% of average rain in the past few months, leaving crops "extremely dry." Also, a La Nina weather pattern could lead to prolonged excessive dryness in Brazil that cuts sugarcane yields." but despite that "Wednesday's data from Unica was bearish for sugar as it showed Brazil's Center-South sugar production in the second half of October rose +14.4 y/y to 1.7373 MMT, with the percentage of cane used for sugar climbing to 43.63% in 2020/21 from 32.02% in 2019/20".
"The International Sugar Organization (ISO) on Sep 1 boosted its global 2020/21 sugar production estimate and increased its global 2020/21 sugar deficit estimate. The ISO projects that global 2020/21 sugar production will increase by +2.3% y/y to 173.5 MMT. The ISO also said the global 2020/21 sugar deficit would widen to -72.000 MT from -14,000 MT in 2019/20. This deficit will be a strong driving force if india, the current holder of most sugar surplus, is able to release there sugar on the note of a possibly favorable WTO rulling.
Conab, Brazil's national crop forecasting agency, boosted its forecast Aug 20 for Brazil's 2020-21 (Apr/Mar) sugar output by +11% to 39.3 million metric tons from May's estimate of 35.3 million MT and 2019-20 production of 29.8 million MT. Conab raised its forecast for Brazil's Center-South 2020-21 sugar output to 35.7 million MT from May's 31.8 million MT. Brazil's sugar mills are expected to divert 46.4% of sugarcane to refined production, up from 34.9% in 2019-20 due to weak ethanol prices and demand.
Currently a break out of the 15.00 resistance would show a change in market opinion and possibly a tighter consolidation before the indian news release.
Whats your thought?
Indian News
The main fundamental reasons for this are the late subsidy announcements from India as they are currently subject to a WTO ruling which started November last year.
"Meanwhile, sugar mills in India have held back exports as they await news on government subsidies. The World Trade Organization (WTO) is expected to rule on the legality of India's subsidies to its sugar exporters sometime this month after Brazil and Australia raised objections to the WTO about the subsidies. The ruling by the WTO has been delayed from July due to the Covid pandemic." [Rich Asplund - Barchart - Thu Nov 12, 2:02PM CST] because of this many hedge funds took long positions and are now stuck bellow strong resistance hoping on the fact that the WTO will be harsh on India after the pandemic which in my opinion is unlikely. Furthermore India will be desperately trying to gain a favorable ruling as "Monday's data from India's National Federation of Cooperative Sugar Factories was negative for sugar as it showed that Indian sugar output as of Nov 5 was up +32.8% y/y at 425,000 MT."
Positioning of Funds and commercials
As of 3Nov, Current commitment of traders sits at:
Commercials - Long / Short
495,848 (+25,068)830,958 (+658)
Non-Commercials - Long / Short
332,801 (-25,945)51,419 (+1,136)
Producers - Long / Short
275,512 (+17,740)640,042 (+1,752)
Swap Dealers - Long / Short
180,727 (+8,247)151,307 (-175)
Managed Money - Long / Short
272,078 (-17,694)25,828 (-2,047)
Other Reportables - Long / Short
60,723 (-8,251)25,591 (+3,183)
This is the first time since the start of the uptrend in march this year that both manage money and non-commercials have reduced there long position in sugar showing the weakness of the market and the clear uncertainty of the market. Secondly commercials and producers have been hedging there position in favour of a market decline as the market is stalling. This uncertainty has created the opportunity where by most funds and commercials are waiting on the Indian news and to see if India will be allowed to take over the market share that Thailand has lost due to drought.
Brazil
Weather has been harsh in Brazil for the crop in the last 6 weeks "Maxar recently said that Brazil's sugar-growing regions had received only 5%-25% of average rain in the past few months, leaving crops "extremely dry." Also, a La Nina weather pattern could lead to prolonged excessive dryness in Brazil that cuts sugarcane yields." but despite that "Wednesday's data from Unica was bearish for sugar as it showed Brazil's Center-South sugar production in the second half of October rose +14.4 y/y to 1.7373 MMT, with the percentage of cane used for sugar climbing to 43.63% in 2020/21 from 32.02% in 2019/20".
"The International Sugar Organization (ISO) on Sep 1 boosted its global 2020/21 sugar production estimate and increased its global 2020/21 sugar deficit estimate. The ISO projects that global 2020/21 sugar production will increase by +2.3% y/y to 173.5 MMT. The ISO also said the global 2020/21 sugar deficit would widen to -72.000 MT from -14,000 MT in 2019/20. This deficit will be a strong driving force if india, the current holder of most sugar surplus, is able to release there sugar on the note of a possibly favorable WTO rulling.
Conab, Brazil's national crop forecasting agency, boosted its forecast Aug 20 for Brazil's 2020-21 (Apr/Mar) sugar output by +11% to 39.3 million metric tons from May's estimate of 35.3 million MT and 2019-20 production of 29.8 million MT. Conab raised its forecast for Brazil's Center-South 2020-21 sugar output to 35.7 million MT from May's 31.8 million MT. Brazil's sugar mills are expected to divert 46.4% of sugarcane to refined production, up from 34.9% in 2019-20 due to weak ethanol prices and demand.
Currently a break out of the 15.00 resistance would show a change in market opinion and possibly a tighter consolidation before the indian news release.
Whats your thought?
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