Weekly Market Overview

Sugar

• With just a few weeks before the expiry of the July 21 ICE 11 contract, sugar prices were largely impacted by the completion of the index roll (see Jargon Buster below), trading sideways. The July 21 contract made its low on Tuesday at 17.30 USc/lb, reaching its high on Wednesday at 17.93 USc/lb, before closing the week at 17.54 USc/lb. 
   
• The latest Commitment of Traders (CoT) report dated 8 June revealed speculators have marginally reduced their position to 238,000 lots net long. We expect this number will have reduced further due to the completion of the index roll and considering recent lower sugar prices.
   
• In Brazil ethanol parity is still strong at 17.42 USc/lb, providing support to sugar prices. UNICA, Brazil’s leading sugarcane industry trade association, released numbers last week that were taken as bearish by the market. Better than expected sugar content was reported which may compensate for the reduced Brazilian crop. Currently 244 mills are operating of which 238 are producing sugar. 
   
• Oil prices hit a two-year high at $US72.69 per barrel. The Organization of the Petroleum Exporting Countries Plus (OPEC+) has anticipated the need for an extra 1.4 million barrels per day in 2022, when it is believed that consumption may return to pre-pandemic levels.

Currency  

• The Australian dollar traded inside the low 77 US cent range for most of the week, briefly falling to 76.90 US cents before settling back up at 77.08 US cents. This was largely driven by the US dollar (USD) positioning ahead of the US Federal Open Market Committee (FOMC) meeting on 16 June.
    
• A recent report on inflation from the US Department of Labor printed an annual inflation rate of 5.0% (a 13-year high).
   
• The Aussie dollar direction in the short to medium term will be largely focused on the USD story. In the week ahead we have the US retail sales report, FOMC minutes and China data to watch. 

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