The markets have continued the upward momentum from late yesterday following a new high close and a first attempt at reaching the 15.50 target basis March NY. The strength was underlined by a stronger structure in both raws and whites futures markets and the continuing rally in the whites premium. March NY has already posted a high of 15.56 and May is also over 15 cents and traded a high of 15.15. March/May spreads in NY have changed hands at a new recent high of 42 points with May July also up to 16 points inverse. With 3 days to go before expiry, March London also hit new highs at 445.60, and the front March/May has widened to 17.40, and the March Whites premium is now valued at $103.50. March London open interest reduced by just over 3K lots yesterday but stands at 23,974 which is still large with 3 sessions left.

Sugar continues to swim against the overall negative Macro picture resulting from fears of lower growth due to the coronavirus pandemic. It has also risen despite the recent stronger USD against exporters currencies, especially against the BRL which traded a new low yesterday at 4.34 and closed at 4.3316 also a new settlement low. The market has broken out of a recent uptrend channel on March NY (the upper limit was 15.25) so attracted fresh Fund and speculative buying. Resistance basis March now lies at 16.05 basis weekly first-month continuation chart and, as March becomes spot next week, we turn to the May contract whose chart shows an overall uptrend channel with current extremities at 15.40 on the upside and 14.52 on the downside. With May also now over 15 cents intermediate support lies at 14.83, 14.71 and 14.68 with further support below the channel at 14.50. Both markets are once again in overbought territory (March RSI 9 day at over 80 and May at almost 79) so we will no doubt see the occasional correction. However, the trend is still very much upwards with the daily increase in Open Interest and with sharp inverses in the structure both upcoming March expiries are likely to be strong with ready receivers, reflecting the perceived deficit in Trade flows.

On a longer-term basis, the Dubai Conference (now ended) yielded a bullish tone tempered with caution. India’s production (expected to be slightly upgraded for this year by ISMA from the current 26 MMT) has been considered an anomaly this year, with expectations of 31 to 33 MMT annual production resuming in the future. Thailand’s production for next year is also expected to be low due to lower acreage due to lower cane prices leading farmers to plant cassava instead added to dry weather conditions this year. Europe is not expected to be an exporter of note next season with beet production expected to be lower due to lower acreage (expected to drop by 8% in France and 1.4% in the EU28). Brazil CS is expected to increase sugar production out of its cane with the mix rising to 37%, but this will be subject to gasoline pricing considerations and on the BRL movements. Conference delegates were mostly bullish before the conference began and remain so after its conclusion.

We remain optimistic that prices will continue firmly in an uptrend for short/medium term though we are cognisant of potential corrections. We believe these will provide further buying opportunities for those who wish to increase positions or who missed the move upwards the first time around.

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