Sugar Market Report for 21 October

Good morning,

The market dropped again yesterday, settling at its lowest level since the 5th of October as the structure continued to weaken in London. The market had opened 1 point lower and held its ground in early trading before, eventually, dropping back towards 18.50. The initial support seen saw prices improve back to unchanged but as US traders got to their desks prices started to ease again ultimately dropping below the lows of the previous session. The market did improve again on speculative short covering but sagged again mid-afternoon failing to recover again and settling just 3 points off the lows of the day. The HK dropped 2 points to end at +89 while the KN slipped 4 points to finish at +42. In London, the structure continued to weaken as longs lessened their positions. The ZH dropped to below +30.00 its weakest since nearly a month before ending at +31.90. The HK weakened and also slipped to end at +8.80 its lowest since the end of August. This meant the WP also dropped away with the ZH WP finishing at 122.50 and the HH WP at 90.60. The market broke decisively lower yesterday giving back all the gains of the past fortnight. However, the trading volume in NY was poor at just over 79k lots. The old trading adage that a move may not be substantiated without volume should be heeded. Nevertheless, the growing view that a decent-sized production surplus will be seen this season especially if demand starts to fall away is putting a bearish taint on the market. The weakness in London is also weighing on raws.

There is limited fresh fundamental news around with still no word from the Indian Government regarding their export policy. Shades of two years ago when the market was patiently waiting for their subsidy policy. It would now seem likely no announcement until later next week after Diwali. Nevertheless, the market believes that, at least, 5 million tonnes will be allowed in the first tranche.

This morning the market opened 1 point lower before a small sell stops was triggered at the low of yesterday (18.36) which took prices down another 10 points. Since then prices have not managed to improve greatly and remain 11 points lower on the day. The HK and KN are virtually unchanged at +89 and +42 respectively. In London, the Z-22 continues to weaken which is also pulling the rest of the board lower. The ZH is down again trading at +29.80 while the HK is unchanged at +8.80. The market looks weak, especially in London. Currently, there appears little support until prices get back to below 18.00 cents. The long-term seasonality chart does often see prices dip during October only to recover by year-end. Whether this is the case this year remains to be seen but it would seem unlikely the market will see a significant collapse from their current levels with support being seen around 17.80 where the market got caught during the second half of August through September. The up-side will be dictated by the macro, Brazil’s late harvest data and Indian export policy all of which could have a bullish impact on the market.