Sugar Market Report for 13 May
Yesterday saw the sixth new low in a row as prices dropped to their lowest level since the 2nd March in early trading. However, prices recovered to end higher on the day. The market had opened 8 points weaker on a negative macro picture and soon broke below the previous sessions lows remaining weak for much of the morning. There was a slight improvement mid-day but prices soon dropped back to register the lows of the day early afternoon. However, with the selling drying up and crude prices improving prices started to recover and, eventually, pushed into the plus column. Further gains were then seen as more short covering appeared with the highs of the day hit shortly before the close. The NV improved 2 points to end at -12 while the VH was 3 points better at -26. In London it was a more positive day with the QV improving nearly $3 to end at +12.00 while the VZ was $2 higher at +3.20. This meant the VV WP regained the drop of the previous session finishing at 95.30 while the VZ was a little weaker at 92.10. The market saw the recent losses extend further yesterday as more fund liquidation was seen as the risk-off attitude continued across many markets and the USD continued to surge higher. However, as the macro improved and crude pushed higher again the market pulled off the lows to settle at the top end of the day’s range and suggesting the double bottom formed at 18.30/32 maybe in place for a while.
Despite the recent weakness which has seen prices fall over 200 points since the high of the year were hit in mid-April many traders returning from the NY dinner week appear to be bullish for the market. Whether this is based on anything more than hopeful optimism remains to be seen. It would appear all hinges on the fate of the Brazilian CS cane crush and how much sugar is eventually produced. Currently, estimates range from a low of 29 million tonnes which Louis Dreyfus predicted earlier in the week to around 33 million tonnes at the top end. At this stage of the harvest it is probably wise to take the view that a similar amount of 32 million tonnes will be produced as last season plus or minus a couple of million either way. Reports from Brazil suggest the crush is quickly getting into top gear. Interestingly, many Brazilian traders in NY this week are rather more sanguine about prospects for prices.
Egypt’s state General Authority for Supply Commodities is seeking 50k tonnes of raw sugar of any origin in a international tender. Offers should be submitted on May 21st CIF for arrival August/September.
This morning the market opened 8 points firmer before quickly improving further. Currently, prices are 12 points firmer. The NV is 3 points better at -9 while the VH is unchanged at -26. In early London trading the QV is unchanged at +12.00 while the VZ is a tad firmer at +3.60. The macro is a positive picture this morning with crude higher along with grains/soya while the USD Index is down after hitting its highest level since December 2002 yesterday. The BRL ended around unchanged at 5.135 last night. It might be the case the funds have now cut their longs to a level they are happy to hold so the selling pressure seen this week may subside which may allow prices to improve further especially with the uncertainty of the Brazilian CS crop. There is unlikely to be much resting selling above the market with producer selling well above. Nevertheless, it maybe the case that the market tries to consolidate between 18.50 and 19.20.
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