Sugar Market Report for 6 July

The market continued its recovery after dropping 5% at the end of last month. The market had opened 8 points higher after being closed on Tuesday for the US Independence Day holiday. Prices soon started to drop back with support found just above 23 cents. The market remained undecided about direction until heavier buying appeared taking prices up to the highs of the previous session. Unable to make further headway prices dipped again but as US traders got to their desks prices started to improve again. This time the highs of Monday were breached before selling appeared which triggered some light liquidation. The pre-settlement period was volatile with prices, initially, pushing back towards the highs of the day only to drop 17 points. Nevertheless, it was a positive performance with prices settling some 165 points off the 3 month lows of last week. The VH improved a couple of points to end at -5 while the HK was 8 points firmer at +139. In London, the structure remained firm with the QV increasing its premium to +6.30 while the VZ was also stronger at +5.80. With just over a week before the expiry of the Q-23 (14th July) the OI is relatively low at 16,702 lots with 6,264 lots traded yesterday. It would seem the delivery will be limited with some of the usual destinations not able to take sugar. Additionally, white sugar demand out of India appears to be robust. The WP improved with the VV WP at 132.60 and the VZ WP at 126.90. The market continues to recuperate from the 430 point drop from the highs. Some shorter term funds have been re-establishing some of their longs and end-users have also been pricing. However, whether the market has the legs to recover substantially more seems unlikely at the moment.

At the risk of sounding like a stuck record, the weather in Brazil and India remains critical as to how much global production for 2023/24 will be seen. The weather across Brazil’s CS remains very conducive for the harvest with limited rain forecast for the next 10 days. Therefore, production should be excellent at the moment and should be confirmed by Unica next week when they release harvest data for the second half of June. Across in India the monsoon has reached the whole country. Now it is all about how much rain falls and where. Total rainfall for June was, on average, 10% lower but with significant variations across the country. Forecasters are confident rainfall will increase during July but nothing is certain.

As expected Brazilian sugar exports in June were higher than last year. Total sugar exports reached 3,081,985 tonnes which is nearly 25% higher than the 2,338,467 tonnes exported in June 2022.

This morning the market opened 3 points weaker before falling another 10 points. However, it soon pushed back to opening levels where they, currently, remain. The VH and HK are both unchanged at -5 and +139 respectively. In early London trading the QV is firmer at +7.90 while the VZ is a tad weaker at +5.70. The macro is mixed so far with energy lower while grains/soya are higher. The USD Index is a tad weaker while the BRL ended at 4.85 yesterday. Having recovered significantly off the lows the market is now seeking a new level and may try to consolidate either side of 23 cents. It is likely to remain volatile as trading volume drops.