Sugar Market Report for 18 July

Good morning,

The market pushed higher on Friday on an improving macro picture to settle at its highest level since 9^th June. The market had opened unchanged before settling into a narrow 10 points range until mid-day. Prices then improved a tad but soon fell back to unchanged where support was found again. This encouraged some speculative buying which, eventually, pushed prices through the double top at 19.19/20. The market hit the highs of the day late afternoon before dropping back 10 points on the close on speculative liquidation and another 9 points post-close. The VH finished 1 point firmer at -14 while the HK was 2 points firmer at +77. The trading volume was limited again at just over 80k lots. In London the Q-22 expired with limited excitement. The QV expired at a healthy premium of +39.00. The VH also improved $2 to end at +27.90. This meant the WP improved again with the VV WP finished at 132.10 and the VZ WP at 104.20. The market improved mainly on the back of an improved macro and limited resting selling above the market. There appeared little reason from a fundamental basis for the market to improve.

The London Q-22 expired with a total delivery of 4,528 lots (226,400 tonnes). The main deliverer was seen as Wilmar with 3,219 lots. Deliveries from India and Dubai made up the balance. ED&F Man were seen to be the main receiver with 2,930 lots. Full delivery information will be released by the exchange later today. A relatively small delivery plus a healthy expiry premium would point to it being a bullish delivery but traders will note that the tape appeared to be the best buyer for some deliverers.

The COT, as of the 12^th July, showed the funds/specs had moved from a net short position to net long. Given the market rallied 135 points during the reporting period it will surprise few that the speculators covered shorts. The non-commercials reversed their net short position of 40,627 the previous week to a small net short position if just 1,061. As prices have improved further since the report it is now likely they hold a small net long position. The commercials increased their net short position by 28,549 to 215,007 as the trade sold into the rally. There was little evidence of end-users chasing the market higher. The Index funds cut their net long position by 18,030 to 205,164 which was on a general risk-off attitude across the investment fraternity.

Brazilian bank Itau BBA reported on Friday they see total Brazilian CS sugar production at 32.2 million tonnes in 2022/23 which is marginally higher than last season. Sugar cane crop seen at 555 million tonnes. This estimate is in line with most recent estimates.

This morning the market opened 2 points higher before improving further. Currently, prices are 13 points firmer. The VH and HK are both unchanged at -14 and +77 respectively. In early London trading the VZ is slightly firmer at +28.60.This morning the macro is a generally positive picture with virtually all commodity markets higher. This would appear purely on the basis that the USD is weaker. The USD index is sharply lower at 107.30. The BRL ended the week weaker at 5.41 on Friday. The market looks set to remain at the mercy of the macro with limited changes in the fundamental picture. The market could continue to improve especially as the funds may start to increase longs and there is limited resting selling above the market.