Sugar Market Report for 16 August

Good morning,

Yesterday saw the market make new highs for the recent move in early trading before falling back. The market had opened 4 points weaker but quickly pushed higher gaining 14 points to hit the highs of the day within the first hour of the session. The macro, which had been negative, started to impact on the market with prices soon falling back into the negative column by mid-day. Prices did improve during the early part of the afternoon as more fund short covering was seen but, eventually, this dried up and prices swiftly dropped to the lows of the day only to pull off the lows by the close to settle slightly lower on the day and in the middle of the day’s range. The VH remained firmer gaining 3 points to settle at a new high for the year of +4. The HK slipped 2 points to end at +63. In London the spot month remained firm with the VZ stronger at +28.40 while the ZH slipped slightly to finish at +16.10. The WP also improved with the VV WP finishing at 152.30 and the VZ WP at 123.90. The market spent most of the session swimming against a bearish macro picture. Even chatter of fuel price cuts in Brazil had little impact. Continuing fund short covering is keeping prices firm. They remain net short but may have cut their net shorts to around 35K lots.

Concerns over the EU (and UK) sugar beet crop continue to grow due to the dry hot weather that has hit the main growing areas of Western Europe over the past weeks. However, it should be noted that heavy rains are forecast for the next few days and especially tomorrow. It does look as if the very hot weather has broken with more mixed weather expected over the next week or so.

Brazil’s oil company Petrobras announced yesterday that they will cut their refinery prices for gasoline to 3.53 BRL per litre which is nearly 5% lower than the current price. The new prices will start today. This is the third cut in the past month and brings the total cut to around 13%.

This morning the market opened 4 points lower before recovering back to unchanged. Currently, prices are 5 points lower. The VH and HK are unchanged at +3 and +63 respectively. In early London trading the VZ is firmer at +30.00 while the ZH is unchanged at +16.10. This morning the macro is negative again with most commodities slightly lower while the USD Index continues to recover after the heavy sell-off last week. The BRL ended around unchanged last night at 5.09. The recovery in prices seen since one year lows were hit has slowed recently and the flat price may sag from current levels. However, the funds remain net short and may cover more. The front spread remains at a premium and the white sugar market remains very firm so any significant sell-off would seem unlikely especially as the funds are unlikely to re-establish shorts at current levels.