Sugar Market Report for 22 June

The market dropped again yesterday as the structure also continued to weaken. The market had opened 3 points higher and then improved to the highs of the day. However, the gains were short lived with a bout of selling appearing and taking prices quickly lower before some support was found just above 26 cents. However, as US traders got to their desks prices start to slide again as the front spread weakened. Prices soon got back to the lows of the previous session where some support was found. This triggered a bout of day-trader short covering but only back to unchanged before prices dropped back again as the NV came under further pressure. The market settled just above the lows with the NV at its lowest level since the middle of November last year at just +3. The VH was also 6 points weaker at +12 its lowest since the middle of April. In London, the structure also continued to weaken with the QV going to a -2.40 discount and the VZ also weakening although only marginally ending at +2.00. The WP also slipped with VV WP at 125.90 and the VZ at 123.90. Despite the weakness of the structure the flat price remains relatively well supported suggesting there is limited fund liquidation with the trade still of the view that the fundamentals remain bullish and physical raw sugar supplies remain tight.

The weather remains the focus for all. Brazil’s CS sees dry weather for the next 10 days which will see the harvest continue to motor in top gear which should be confirmed by Unica when the 1st half June data is released sometime next week. The Indian monsoon is more of a concern. It has been start/stop so far with, initially, a delayed start. It is expected to resume its spread across the country after stalling for several days but with El Nino developing there is certainly uncertainty about how much rain will eventually fall.

Chinese imports remain low so far this year. As of 23rd May China had imported 770k tonnes of raws and 286 tonnes of white sugar. Imports are expected to be weaker in June as well. Last year China imported 4.6 million tonnes and it is thought they are committed to around 2.5 million tonnes so far this year so they are likely to buy if prices drop. However, their liquid sugar imports are strong and there is talk that smuggled sugar is on the rise. However, they will need to buy sometime but, probably, not while prices remain at current levels but they may be forced eventually.

This morning the market opened unchanged but soon dropped as the front spread continued to weaken. Currently, prices are down 20 points in spot month. Currently, the NV is down 5 at -1 while the VH is 2 points weaker at +10. In early London trading the QV is unchanged at -2.40 and the VZ is weaker at +1.60. The macro is a negative picture this morning with most commodities weaker while the USD index is slightly firmer and the BRL ended slightly weaker at 4.79 yesterday. The front spread is under increasing pressure and is now at a discount as longs roll out of spot in front of the expiry next week. The OI in N-23 is 113,610 lots with another 69,459 lots traded yesterday so it does look as if the deliveries will not be huge.