Sugar Market Report for 15 September

Good morning,

An early attempt to push higher soon fizzled out yesterday with the NY market finishing a tad lower. London saw the front spread strengthen again in front of the V-21 expiry today. The market had opened 6-8 points firmer before improving another 10 points to hit the day’s highs some hour after the opening. Prices soon started to fall back culminating in the lows being hit just as US traders got to their desks as a sell stop was triggered at 18.90. Prices soon recovered but never looked capable of challenging the earlier highs and fell back by the close to end 2-3 points lower. The trading volume was good again but majority was spread related. The VH ended 1 point better at -70 while the HK was unchanged at +43. In London the V-21 continued to improve considerably against the rest of the board as the last of the shorts exit is front of expiry. The VZ ended at -3.60 having gained over $18 since Friday’s close. The ZH also improved to settle at -4.90. The OI in V-21 fell to 3,672 with another 1,930 lots traded yesterday continuing to suggest a small delivery. It is also the V-21 option expiry in NY today. Much of the OI is in the 19 cent and 19.50 calls and 19 cent puts suggesting prices could hold around 19 cents today.

The French farm ministry reported yesterday that they expect the country will harvest 33.12 million tonnes of beet this year up a large 26.4% from 2020. This despite late frosts causing severe damage to the emerging beet leaves in April. The ability to treat seed against virus yellows using neonicotinoid has also helped the situation after the pesticide ban in 2020. However, the wet summer across Europe is expected to impact on the sugar content of the beets especially in France with an expected 6% drop in yields compared with the 5 year average. Good sun over the next few weeks will help but it might be too late to have any large impact.

Hurricane Ida impacted on around 118k acres of sugar cane in Louisiana – about 26% of the crop according to a report by the Louisiana State University and industry group Sugar League and could see agricultural yields down by between 16 and 29%. The report did say that there had been no serious damage to the local mills so no delay to the crushing season is envisaged.

This morning the market opened 2-3 points firmer before improving further. Currently, prices are around 6-8 points firmer. The VH is 2 points weaker at -72 while the HK is 1 point better at +44. In early London trading the VZ is unchanged at -3.60 while the ZH is a tad firmer at -4.30. The macro is generally positive this morning with crude and grains/soya higher. The USD Index is a tad weaker while the BRL ended unchanged last night at 5.26. With the option expiry today prices may hold around the nearest strike of 19 cents although volatility has been seen in past option expiries with a push higher to the 19.50 strike more likely than a drop back. Overall, the market looks likely to continue to consolidate after finding support below 19.50 (basis H-22).