Sugar Market Report for 17 August

Good morning,

The market dropped back yesterday as the negative macro eventually impacted on prices. The market had opened 4 points weaker before improving marginally. This proved to be the high of the day as prices soon started to drop as more speculative selling appeared. By mid-morning the market was just over 20 points lower on the day with some support found at 18.30. This initiated some short covering and some light fund covering but resistance was found at the earlier highs with prices soon retreating back to the earlier lows. However, another bout of selling appeared as settlement approached which saw prices drop to the day’s lows wiping out most of the gains of the past three sessions and settling at a week’s low. The VH slipped 1 point but still remained at a small 2 point premium while the HK improved 2 points to finish at +65. In London the VZ improved $1 to end at +29.40 while the ZH slip $1 to +15.10. The WP also slipped lower with VV WP ending at 151.10 and the VZ WP at 121.70. With the recent fund short covering becoming more sporadic it was not too surprising prices dropped away yesterday having recovered 150 points from the lows hit at the beginning of the month.

A third of Ukraine’s sugar refineries are unlikely to operate during the beet harvest this year according to the producer’s union Ukrtsukor due to the war and very high gas prices. Nevertheless, it is estimated that, despite the war, sugar production will reach 1.08 million tonnes some 17% lower than last year. However, with stocks at 470k tonnes it is likely the country will be able to cover domestic consumption and some small exports.

There is scant fundamental news around at the moment. The weather appears to be causing limited issues. Recent rains across Brazil’s CS have been beneficial. The Indian monsoon has been sufficient so far as has the rains across Thailand. Even the EU and UK are seeing meaningful rains for the first time in many weeks. While it may not lessen the dry conditions too much it is likely to stop any further damage. Brazil’s government continue to cut fuel prices and the threat of a global recession could impact on demand. On the plus side white sugar prices remain well supported with the WP at very strong levels.

This morning the market opened 1 points lower before improving into the plus column. Currently, prices are 8 points firmer. The VH is 3 points better at +5 while the HK is unchanged at +65. In early London trading the VZ is barely changed at +29.30 while the VZ is also virtually unchanged at +15.30. This morning the macro is a more positive picture than of late with most commodities trending higher despite the USD Index also being firmer. The BRL weakened yesterday finishing at 5.14 last night. The market may see some consolidation around current levels with support at below 18.20. The funds still remain net short so may take further cover especially if the macro remains positive. The spot month premium will also be seen as supportive as will the continuing strength seen in London. Traders also await news from the Indian Government as to what their export policy will be for the coming 2022/23 season. While there is no news Indian mills will be reluctant to make any sales although current prices will be prohibitive in raws at the moment.