Sugar Market Report for 17 August

The market improved again yesterday although the gains were marginal. Nevertheless, V-21 settled above 20 cents for the first time. The market had opened 4 points firmer than settlement but below the last print on Friday when prices jumped 15 points in the post-settlement period. The market quietened for much of the morning but held in the plus column. Some light liquidation was seen soon after US traders got to their desks when the lows of the day were posted but a bout of fund buying soon appeared taking prices to the highs of the day and a new 4 ½ year high. As the buying eased prices slipped back to below 20 cents before trading either side of the level through to the close. The trading volume was thinner than of late reaching just over 108k lots. The VH weakened again to end 3 points weaker at -60. However, the HK continued to improve settling 6 points better at a new high of +112. In London the flat prices improved again which saw the WP improve again. The VV WP is now back to near 55 while the HH WP ended just shy of 65.00 – still below most refiner’s costs but suggesting further improvement might be seen. The VZ ended slightly better at -16.60 while the ZH eased slightly to -6.80. It was another solid performance as the funds added to their net long position. The COT showed, as of 10^th August they had added 18,012 lots to bring their net total to 195,392. Their current net long position is probably now around 210k lots net long so still have ability to buy more.

Understandable India mills are planning to produce raw sugar at the beginning of the next harvest to take advantage of the high sugar prices according to local exporters. Traditionally, mills produce white sugar for local consumption but will be looking to take advantage of the high world prices. It is estimated that mills have already contracted to export around 725k tonnes of raws75k tonnes of whites for shipment between November and January. These shipments are likely to be from existing stocks and further sales against new crop will not be concluded until the raw sugar has been produced. It is estimated India could export another 6 million tonnes in 2021/22. This strong export demand has seen local sugar prices surge by 10% since mid-July to a 4 year high.

This morning the market opened 1 points lower but was soon back to unchanged. Currently, prices are holding around 6 points firmer and just below the 4 ½ year highs. The VH is 1 points better at -59 while the HK is unchanged at +112. In early London trading the VZ is around unchanged at -16.60 while the ZH is slightly firmer valued at -6.30. The macro is mixed this morning with equities and crude lower while grains/soya are firmer. The USD index is also slightly firmer while the BRL ended around unchanged at 5.26 last night. The market continues to look bullish and further gains look likely. However, the market has now gained over 220 points in less than a fortnight so the up-side, for the time being, maybe limited. Most traders will not have been surprised by the recent strength given the concerns over the Brazilian CS crop. Much will depend on the fund’s appetite to increase their net longs. They have a net long of over 200k lots and may decide to hold fire for the time being. Nevertheless, any dips will be seen as a buying opportunity so the down-side would seem limited. The improvement in the WP will also be seen as positive and is likely to improve further.