Sugar Market Report for 1 July

Prices rallied early yesterday but, eventually, dropped back to unchanged by the close apart from the expiring N-22 contract which went off the board at a 33 point premium. The market had opened 2-3 points weaker but soon started to climb with a couple of buy stops triggered at 18.55 was breached. The market remained firm through to the afternoon when prices dipped back to opening levels before quickly gaining 26 points to hit the highs of the day as US traders got to their desks. However, as the buying dried up prices headed south and ended just below unchanged with the limited trading volume adding to the volatility. The N-22 expired with limited fireworks but, nonetheless, ended at a healthy premium to the second month as some sugars were rolled back to the spot month for delivery. The VH ended unchanged at -27 while the HK dropped 4 points to end at +56. In London the QV was slightly weaker at +22.00 while the VZ was $1 firmer at +18.00. The VV WP improved to end at 126.70 while the VZ WP was also firmer ending at 108.70. There will be the usual debate on the N-22 expiry. It appears just over 500k tonnes of sugar were delivered. A small delivery and 33 point premium would suggest slightly bullish although it has only been in the last week the spot month has moved to a premium. Whether the now spot V-22 will improve remains to be seen but the market is being buffeted by outside influences with the macro negative, global recession fears growing and ethanol prices slipping in Brazil.

Early indications are that a total of 9,897 lots were delivered against the N-22 (around 502,000 tonnes). Louis Dreyfus is the largest receiver (5128 lots) while Viterra (Glencore) is seen as the largest deliverer (4528 lots). Raizen and Wilmar were also seen as receivers. Official delivery data will be announced by the ICE exchange later today. The Brazilian cash premiums meant that limited Brazilian sugar ended up in the tape. The sharp increase in the line-up of sugar shipments from Brazil at around 3.4 million tonnes suggests good demand for raw sugar.

This morning the market opened 5 points lower before slipping further mainly on a negative macro picture. Currently, prices are 14 points lower. VH is a couple of points weaker at -29 while the HK is also weaker at +54. In early London trading the QV is weaker valued at +21.40 while the VZ is valued around unchanged at +18.00. The macro, as mentioned above, is negative with most commodities lower with the release of the USDA report yesterday, which was not seen as bullish, weighing on grain and soya prices. The USD index is stronger at 104.80 while the BRL ended last night weaker at 5.24. It is likely to be a quiet post-expiry session especially as NY is closed on Monday for the Independence day holiday. For the time being sugar fundamentals remain slightly bearish but rather more on the basis of what could happen than anything else. The weather has been kind to the cane in most regions recently but that can change as can energy prices which could boost Brazilian ethanol demand which is soft at the moment.