Sugar Market Report for 11 July

Good morning,

Friday saw another session of good gains as the market bounced off the 4 month lows reached earlier last week. An improving macro and decent physical demand seen as the two reasons for prices settling some 130 points off the lows. The market had opened 3 points lower but soon started to improve. The gains were steady throughout the session with little pull-back noted. Prices, eventually, hit the day’s high late afternoon before slipping slightly on some light speculative long liquidation. The VH improved again ending 3 points firmer at -12. The HK also saw a good improvement jumping to +74 its highest level since 23^rd May. In London the spot month maintained its premium with one week until expiry. The QV finished at 25.60. The OI dropped to 16,370 lots with another 5,421 lots traded on Friday. The VZ was barely changed at +20.70. The WP was little changed with the VV WP ending at 124.00 and the VZ at 103.30. The market has seen a good recovery from the 4 month lows hit last Wednesday. The drop appears to have triggered some good physical buying which has impacted on prices as end-users see prices attractive. There was also a general view that the sell-off seen across the commodity spectrum was over-done. Recession fears were the primary reason for the selling but with global economy still improving demand for commodities may not drop too much over the next few months.

The COT as of the 5^th July showed that the funds/specs had moved from net long to net short as had been expected. They sold 49,691 net building a 36,736 net short position. The non-commercials ended with a net short position of 39.021 having sold net 40,627. This is the first time they have build a net short position since March 2020. Needless to say, the rally seen on Thursday and Friday suggests they have cut some of the shorts and are now around 10k lots net short. The commercials cut their net short position by a massive 58,769 to 186,458 as end-users took advantage of the market weakness to price. The Index funds cut their net longs by 9,078 to 223,193.

Russian sugar beet is showing an average root weight of 93 grammes compared with 101 grammes in July last year the Russian Sugar Producers’ Union reported Friday.

The Indian monsoon has now advanced to cover the whole of the country. Rainfall has been good but somewhat erratic in certain areas. Nevertheless, the IMO are predicting the monsoon will be 103% of the long term average from 99% predicted at the end of April. If the expectations are true then it will be the fourth consecutive year that the monsoon has been adequate which is something not seen in recent history.

This morning the market opened 3 points firmer before improving swiftly another 7 points. However, prices have since eased and are, currently, 3 points firmer. The VH is 2 points firmer at -10 while the HK is 1 points better at +75. In early London trading the QV is weaker valued at +23.60 while the VZ is firmer at +21.40. The macro is mixed this morning with crude lower while grains/soya are higher again as they continue their correction after falling dramatically last week. However, the USD index is very strong again today just below its highest level since late 2002. The BRL improved late last week to end at 5.2560. The market looks set to remain firm having recovered all the losses over the past month. However, whether there is any compelling reason for prices to rally further remains to be seen. End users have taken advantage of the weakness to price and are probably very much more comfortable than back in May. The funds are, probably, still slightly short so may cover and may start to build a small long position. However, the macro remains very volatile and uncertain which may mean traders sit on their hands for a while.