Sugar Market Report for 20 June

Friday saw a volatile day as prices rallied higher on the possibility of more Indian export caps for next season and Petrobras raising gasoline prices. However, prices dropped back to unchanged by the close as crude prices dropped over 5%. The market had opened 14 points higher before immediately gaining another 10 points. Prices continued to improve during the early morning hitting the day’s highs mid-morning. However, resistance was encountered as prices approached 19 cents not helped by a negative macro picture. Prices steadily fell for the rest of the session as crude prices continued to fall with the market eventually settling just a couple of points better on the day. The NV slipped 4 points to -13 while the VH was 1 point better at -29. In London it was quieter with the QV ending slightly weaker at +26.00 while the VZ was firmer at +18.10. This meant the WP improved with the VV WP finishing at 122.00 and the VZ at 104.40. The early gains were on the back of chatter than India will restrict exports next season and also news that Brazil’s Petrobras were raising gasoline and diesel prices as of Saturday. However crude’s collapse trumped this news and prices were unable to hold the early gains.

Brazil’s state oil company decision to hike fuel prices was met with protests from President Bolsonaro and other politicians who are keen to keep inflation under control. Bolsonaro was particularly scathing in his criticism saying that Petrobras might plunge Brazil into chaos. There is probably a lot more of this story to run.

It looks likely that India may impose a ceiling on sugar exports for a second year running according to a government source. It is thought that exports could be capped at between 6-7 million tonnes to ensure ample domestic supplies. Whether there is genuine concern over internal supplies or it is just a rouse to talk prices higher is uncertain. However, with another mammoth amount of sugar likely to be produced next season it is odd the Government are already talking about limiting exports. Time will tell but it is possibly a precautionary view until a more accurate estimate to production is received.

India’s monsoon which started at the beginning of June has now covered half the country and likely to advance further over the next week. Rainfall is now approaching average after a slightly drier start than normal which bodes well for the rest of the monsoon period.

The COT report showed that, as of the 14^th June, the funds/specs had cut their net long position by a large 41,555 to 71,161. A cut was expected as prices dropped around 40 points during the reporting period. The non-commercials cut their net longs by 30,403 to 42,819 their smallest net long position since early March. The commercials cut their net short position by 40,330 to 311,800 as end users priced with the trade alleviating some pressure to buy that had built recently. The Index funds increased their net longs position by 1,225 to 240,637.

Today the NY market is closed for the new Federal Juneteenth holiday when the US commemorates the emancipation of slaves. London will close an hour earlier. This morning London opened virtually unchanged before dropping $3 and towards the support at around $555.00. However, prices have now recovered and trading around closing levels on Friday. The QV is $2 lower at +24.00 while the VZ is unchanged at +18.00. It is likely to be quiet today with US closed but also likely to remain firm. Some bulls may take advantage of the low liquidity to push prices higher.