Raw Sugar prices
⦁ Overview: Raw sugar prices rebounded strongly as positive sentiment returned to the ICE 11 market following news that the new COVID-19 strand, Omicron, is likely to be less severe than its predecessor variants. The March 2022 contract moved rapidly higher from its low on Monday of 18.76 USc/lb up to a high of 19.90 USc/lb on Wednesday before closing the week at 19.71 USc/lb.
⦁ Brazil: Despite a second La Nina weather pattern formally announced, Centre South Brazil has experienced above long term average rainfall in the Sao Paulo, Goias and Minas Gerais regions in November, which may continue into January. Sao Paulo has recorded 339mm of rain since the beginning of September, more than double last year’s 157mm over the same period. The Brazil Central Bank raised interest rates by 150 points up to 9.25% in an attempt to control inflation, however this may push the country deeper into recession.
⦁ India: The All India Sugar Trade Association (AISTA) has predicted that 3.3 million metric tonnes (mt) of 2021/22 Indian sugar has been contracted for export and approximately 1 million mt of which has already been shipped. Industry rumours state that the Government will limit the number of exports to 5-6 million mt.
⦁ Commitment of Traders (speculator activity): The latest Commitment of Traders report dated 7 December revealed speculators had reduced their position by a further 11,000 lots, down to 130,000 lots net long.
⦁ Overview: Similarly to sugar, the Australian dollar bounced strongly off its year to date lows last week as the currency was boosted by risk on sentiment returning to global markets. The AUD traded from a low on Monday of 69.95 US cents up to a high of 71.87 on Thursday.
⦁ United States: As markets predicted, the US Consumer Price Index (CPI) printed at the highest level since 1982, rising from 6.2% to 6.8%. The third straight jump above 0.4% appeared to be driven by car prices, accommodation (rent and house prices) and airline fares, indicating that inflation has not yet peaked and will likely push the Federal Open Market Committee (FOMC) towards a rate hike in 2022. The next FOMC meeting is scheduled for this Wednesday, 15 December.
⦁ RBA: As widely expected, the RBA left interest rates on hold and the quantitative easing program unchanged in their December meeting on Tuesday. The same phrase from last month’s meeting was repeated, stating “the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range”. Whilst the RBA has now removed an exact timeframe prediction from their statement, markets have now fully priced in a rate hike by July 2022.
⦁ Oil: Oil prices finally broke out of the seven week downward trend after being supported by easing concerns over Omicron and its effect on worldwide fuel demand. West Texas Intermediate (WTI) oil closed the week at $US71.67 and Brent at $US75.15 per barrel.