Sugar Market Report for 10 July

Friday saw another day of consolidation as the trading volume dropped again. The market had opened 10 points weaker but soon started to recover with the lows of the day in place within the first couple of minutes. Prices continued to improve throughout the morning and early afternoon with the highs of the day hit mid-afternoon. This was a new high following the recent price recovery but the buying eventually started to dry up which triggered some day-trader liquidation which took prices some 30 points off the highs where the market settled with the market gaining the losses of the previous session to close unchanged from Wednesday. The VH lost 4 points to close at -9 while the HK was 7 points firmer at +136. However, as mentioned, the trading volume was poor at just over 83.6k lots. In London the QV improved slightly to +12.00 with a week to go until expiry of the Q-23. The Q-23 OI dropped to 12,751 with another 3,765 lots traded on Friday. More consolidation seen as the market tries to find a level after the volatility in late June.

The COT as of the 3rd July showed the funds/specs had cut the net long position by 21,438 to 120,088. The non-commercials cut 23,171 to 89,779 which is their smallest net long position since November last year. It would seem they have completed their long liquidation although unlikely to reinstate too many longs for the time being. The commercials cut their net short position by 16,838 to 285,686 as the trade bought back shorts. The Index funds increased their net longs by 4,601 to 165,599.

The Indian monsoon now covers the whole country but rainfall remains uneven but is expected to increase during July. Some summer-sown crop plantings are lagging. However, this does not seem to be the case with sugar cane. It is estimated that the sugar cane area rose 4.7% to 5.58 million hectares.

This morning the market opened 4 points weaker before slipping further. Currently, prices are 14 points lower. The VH is 2 points weaker at -11 while the HK is unchanged at +136. In early London trading the QV is unchanged at +12.00 while the VZ is slightly weaker at +7.40. The macro is a mixed picture today so far. Crude is lower but grains/soya higher. The USD Index is slightly firmer while the BRL ended unchanged on Friday at 4.85. More consolidation would seem likely as the market looks to build a base with support at 23 cents and resistance above 23.80. Unica should release their second half June data this week which may weigh on prices as likely to show high production.