Market Update

By QSL Treasury Analyst Shaun Tupou

Current as of 19 January 2016

Market Commentary
Sugar
Raw sugar futures prices recently plunged before bouncing back over two days to erase all losses
made during the fortnight. Following a macro meltdown in China, steadiness was brought back to
the market as Chinese headlines tapered off and the Index Fund re-weighting period drew to a close.
The prompt contract, March16, bounced off a two-month low (13.93 c/lb) to trade back toward 15
cents. Spread activity also regained some upside momentum, with front spread March/ May trading
back to a top of +51 on Friday, despite trading near +26 earlier in the week.
The latest Commitment of Traders report was released as expected on Friday. The non-index funds
had used the index re-weighting period and recent market weakness to reduce their enormous long
position. As at Tuesday 12 January 2016 the non-index funds were reported net long 160,000
contracts, with a rather sizeable reduction (32,000 longs) following previous reductions of less than
10,000.
Despite the Brazilian harvest being complete, we received the UNICA (Brazilian Sugar Cane Industry
Association) report for the second half of December last week. It had nothing unexpected to add,
with final sugar production for the year at 30.5 million tonnes.
Going forward we see a few important factors in the near-to-mid-term which should provide some
direction for sugar prices. Firstly, the Indian crop is well under way and provided there are no major
events, the crop should remain in line with original estimates (26-27 million tonnes). Additionally,
we note that indications for slightly lower production by other major producers are also tipped to
fall further due to lower yields, as most continue to feel the effects of El Nino weather events.

Currency
Following a whirlwind week for the Australian dollar, it appears to have stabilised and fallen into a
150 range (0.7077-0.6920) over the past week. A mild surprise on Friday saw the AUD dip back
below 69 cents before gradually solidifying on Friday overnight, despite the US being closed for the
Martin Luther King Jnr public holiday.
Going forward, we have local consumer confidence and US Consumer Price Index data due
tomorrow to round out the week for our key drivers. Risk remains skewed to the downside, as China
continues to dominate price action for the AUD. A positive consumer confidence print tomorrow
could ensure some relief from recent pressure.

This report contains information of a general or summary nature. While all care is taken in the preparation of this report, the reliability,
accuracy or completeness of the information provided in the document is not guaranteed. The update on marketing and pricing activity
does not constitute financial product or investment advice. QSL does not accept any responsibility to any person for the decisions and
actions taken by that person with respect to any of the information contained in this report.