Sugar Market Report for 27 September

A volatile day saw the spot month hit six week highs as the spot month premium jumped to a new high. However, prices retreated to end well down from the highs. The market had opened unchanged before immediately dropping lower in line with the continuing negative macro picture with the lows of the day soon posted. However, as the VH started to improve, prices soon were back in the plus column with some resistance found above 17.85. This prompted some day-trader liquidation which saw prices slip back 20 points. The market then started to improve again as buyers appeared across the commodity complex. This saw prices improve again hitting the highs of the day with the V-22 reaching its highest level since 20^th July as the VH burgeoned out to +85. However, prices soon fell away with the market (apart from V-22) ending in the negative column. As mentioned the VH remained very firm throughout the session hitting new highs before falling back to end 9 points firmer at +73. The V-22 OI dropped to 54,501 lots with another 28,406 lots traded yesterday. It would seem trade longs are happy to be positioned to take delivery with shorts having to cover. Nevertheless, the large premium appears to be attracting sugar to the tape although it still looks likely to be a small delivery. The HK improved 4 points to finish at +66. In London it was another quiet session. However, the structure remains firm with the ZH ending over $1 firmer at +36.80 while the HK was unchanged at +10.50. The WP also maintained its strength with the ZH WP finishing $2 firmer at 145.70 and the HH WP slightly firmer at 109.00. The whole of the commodity complex remains very volatile as the macro continues to dominate. Coffee rocketed nearly 12 cents higher at one point yesterday only to fall back nearly 10 cents. The spot month premiums should ensure sugar remains relatively firm but with a likely global production surplus for 2022/23 prices could drop back once the V-22 is off the board.

Unica will release their harvest data for the first half of September today at 15:00 (London time). The crushing has been hampered by rain over the past two weeks and is one factor that has impacted on the spot month premium. This time last year a crush of 38.4 million tonnes was seen producing 2.54 million tonnes of sugar with a split of 44.95/55.05. Analysts seem unsure of what impact the rain has had although the split is expected to be around the same as the second half of August at 48.45/51.55. More rain is seen for this week but will become drier from the weekend. While it has hampered field operations it will be beneficial longer term and should ensure a long tail, assuming the weather allows.

The market awaits the Indian Government’s export policy for 2022/23. Despite a promise that an announcement will be made very soon it was nearly a fortnight ago. The view is that the Government will initially allow 5 million tonnes of exports before assessing the situation. However, the industry is wanting a full 8 million tonnes of exports to be allowed straight away.

This morning the market opened 8 points firmer before improving further. Currently, prices are 12 points higher. The VH is 1 points firmer at +74 while the HK is 2 points firmer at +68. In early London trading the ZH is firmer at +37.90 while the HK is also stronger at +11.10. The macro is more positive this morning after two days of negativity as the USD surged. Yesterday, the USD Index hit its highest level since May 2002 but has slipped back today. This has encouraged some short covering across the commodity complex with most higher at the moment. The sugar market looks likely to remain firm in front of the Unica data which might disappoint and may suggest total production may struggle to be markedly more than last season’s 32 million tonnes. 4 sessions until the V-22 expiry with only limited participants still involved. While the V-22 premium is likely to be maintained if not firm further it would seem likely H-23 will remain within its range seen since for the past month.