Sugar Market Report

Yesterday, the market gave back the slim gains of the previous shortened session to end unchanged from Friday. The trading volume was better than of late as the front month roll starts in earnest. The market had opened unchanged but soon improved on the back of positive macro and weaker USD with the high of the day hit a couple of hours after opening. However, the resistance at 12.80 was enough to stop further gains with prices then remaining within a narrow trading range until US traders got to their desks when prices dip back to near unchanged. Another attempt to push through the resistance was attempted mid-afternoon but it was fairly half-hearted. This second failure triggered some speculative long liquidation which took prices down to the day’s lows before a slightly improvement on the close had prices settling 6 points down on the day. The VH ended a couple of points weaker at -64 while the HK was also 2 points weaker at +20. In London it was a slightly different story with gains seen in the flat price which saw the VZ improve by over $1 to end at -4.20 while the ZH was virtually unchanged at -3.80. This meant the VV WP gained nearly $3 on the day to close at around 84.70. The HH WP was also slightly better at 74.80. The news that the International Sugar organisation has forecast a small deficit of 720k tonnes for 2020/21 was supportive in early trading but this was countered by a big cut in their estimated global deficit for 2019/20 from an earlier 9.3 million tonnes deficit to just 140k tonnes mainly due to the impact of the pandemic on consumption.

Over the past couple of weeks the market has dropped around 50 points with the structure in both NY and London weakening suggesting limited demand and better production prospects. This despite a weaker USD which hit its lowest level last week since early May and general fund buying across the commodity complex recently. Brazil continues to produce sugar at record breaking pace. As of the middle of August the total crush for the season was running at around 6% higher at 372 million tonnes with sugar production at just shy of 23 million tonnes a whopping 48% higher than the same time last season. Most analysts see total production above 37 million tonnes. India’s monsoon continues to be good allowing excellent planting of all crops. The sugar planted area is expected to be around the same as last season. The recent rains across Thailand have helped improve cane prospects but it is still going to be a small crop and sugar production, probably, no more than last season. The EU crop is very mixed with dry weather and disease causing issues for several countries while others have fared much better. The biggest issue is physical demand and the continuing impact of the pandemic. While it is very difficult to assess to drop in consumption as yet current demand is limited at the moment.

Despite the good weather and prospects for a bumper cane crop in India concerns have been raised about the impact that Corona will have on their ability to harvest the cane. India’s cane harvest is due to start in October once the monsoon has finished. With only around 5% of the crop harvested mechanically there is a need for a huge number of migrant workers. The concern is that these workers will fear being infected by the virus and will not travel to the harvest areas happy to accept lower pay for local jobs. The government who are struggling to contain the virus may also put travel restrictions in place stopping workers from travelling from state to state. Therefore, there is likely to be a slow start to the harvest just as the Brazilian harvest is starting to wind down. Many mills have been investing in sugarcane harvesters but it not likely to have any huge impact in the short term. It is thought that nationwide there has been orders for over 200 harvesters by mills. Whether they will be delivered in time for the harvest remains to be seen. Nevertheless, many of the workers rely heavily on the wages they earn from the harvest so, if they can, they are likely to travel to the work regardless of Corona.

This morning the market opened unchanged and in a sleepy mood. Prices have since slipped a touch and are, currently, 2-3 points down on the day. The VH and HK are unchanged at -64 and +20 respectively. In London the VZ is a tad weaker at -4.10 as is the ZH at -3.30. The macro is mixed this morning with crude a little firmer while the USD is continuing to improve off its lows. The sugar market seem content to remain within the recent range of 12.50 – 13.00 for the time being and until the fundamental picture changes.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598

Email: admisi.sugar@admisi.com

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