Market Update

Shaun Tupou
Treasury Analyst
Current as of 7 September 2015
Market Commentary
Sugar
It was another positive week for sugar, as the market took to positive gains across a constructive
fortnight. Prompt contract October 15 surged to a fortnight high of 11.64c/lb in the last session
before settling weaker at 11.27. Despite weakness on the close, spot October 15 closed the
reporting period a remarkable 83 points higher. It appears the market is comfortable holding a rally,
proven by the consecutive rallies over the past week.
Similarly to the movements displayed in flat prices, spread activity narrowed notably. Trading down
from -117, the front spread October/ March traded to a top of -82 points over the fortnight. Despite
a turn from these highs in the following session, the October/ March spread traded into positive
territory across the whole of the past week before settling lower at -94.
Even though weve seen insignificant movements over the past few weeks, the non-index funds
reduced their shorts by a sizeable amount over the past week, adding a mere 2000 lots. The nonindex funds reported a reduction of approximately 30,000 shorts as at 1 September 2015. Of interest
will be the next report, which covers the best part of a rally which market expectation believes will
see the non-index funds closer to nil shorts.
With China headlines directing much price action across currencies, the Brazilian Real was no
exception. For the fortnight, it was all one way traffic as the Real traded down to a 3.86 low. Centre
South Brazil has received below average and expected rainfall for the past two weeks. However, the
latest forecast for the week ahead shows some very heavy rainfall. Interestingly, chatter around the
potential effect of El Nino has begun again. Whether this will substantiate into anything further will
be the key driver, but the latest forecast certainly creates some speculation.
Going forward, this week we see the latest UNICA (Brazilian Sugarcane Industry) report for the
second half of August as a key driver. Expectation is that production will be near 48 million tonnes
crushed, partnered by 3 million tonnes of sugar crushed. The key out of this will be the latest ATR
(sugar) levels, which will determine whether flowering in the regions is affecting yields.
Currency
Serious volatility has been shown in currencies across the board over the past fortnight, with the
Aussie dollar soaring over a 400+ point range (0.7310 0.6908) following further weakness in global
equities. Going forward this week, we see the AUD remaining under pressure following on from the
weaker Friday close. Concerns regarding the commodity complex, the US and China will also provide
reasons for AUD softening. US data continues to keep a rate rise on the radar, with the Federal
Reserve due to meet next week. Locally, this week we see consumer confidence and employment
data as our key drivers.

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.