Sugar Market Report for 22 August

The market ended at its lowest settlement since the 6th of July yesterday after early strength evaporated. The market had opened 4 points higher and soon improved another 25 points before taking a breather. The market remained firm for much of the session reaching the highs of the day mid-afternoon. However, once the fresh buying dried up prices started to drop back. The selling became heavier as the lows of the previous session were breached with more liquidation seen as Wednesday’s low was also broken taking prices down to below 23.50 where some light support was found. However, further liquidation ensured prices did not recover too much settling just 2 points off the lows. The VH slipped 1 point to end at -31 but did not break below the multi-month low reached on Friday. The HK also weakened losing 5 points to end at +111 its lowest level since the end of June. In London, it was a different story with the VZ improving $2.50 to finish at +16.90 while the ZH remained unchanged at +8.50. This meant the VV WP improved to 165.90 which is near the recent highs seen at the beginning of the month. The VZ ended around unchanged at 149.00. Yesterday’s late slump in price will have taken some by surprise. Talk of below average monsoon rains in August across many parts of India is expected to be supportive but dropping global physical demand is taking its toll on prices.

One large example of faltering demand is Chinese imports of sugar. It was reported yesterday that China imported just 110,000 tonnes of sugar during July a 60.5% drop compared with July 2022. Cumulative imports for the year have now reached just 1.21 million tonnes a 41% drop year on year. It looks as if China is drawing down on existing stocks because of high world prices. Many will argue that they will have to replenish stocks at some point and this should be supportive.

The EU crop monitoring service MARS has increased their sugar beet yields in their monthly report published yesterday. They now see yields at 73.7 tonnes per hectare up slightly on the 73.7 tonnes per hectare reported in their July report. This new yield figure is some 2% above the five-year average. Most EU producers are seeing their yields around the 5 year average despite the hot weather seen in Southern Europe while Czechia, Slovakia and Hungary yields are above average. Only Lithuanian yields are predicted to be below the 5 year average.

This morning the market opened 8 points higher and has improved slightly with prices, currently 112 points firmer. The VH is 2 points firmer at -29 while the HK is 1 point firmer at +112. In early London trading the VZ is slightly higher at +17.20 while the ZH is higher at +9.00. The macro is a general mixed picture this morning. Crude is virtually unchanged while grains are mixed. The USD Index is lower while the BRL was around unchanged last night at 4.98. It is difficult to predict direction at the moment. Yesterday and Thursday saw the market rally strongly during the first half of the session only to slump back into losses by the close. The larger funds seem side-lined for the time being and the trade are torn between limited demand and potentially bullish weather issues in India, Thailand and later in Brazil. The August low so far is 23.29 only narrowly avoided yesterday. This is the next downside target which may see further liquidation if breached.