Sugar Market Report for 29 June

The market continued its dramatic decline yesterday dropping to its lowest level since 6th April and some 390 points off the highs reached just seven sessions ago. The market had opened 20 points stronger but soon turned lower putting the highs of the day in place in early trading. The market, initially, dropped to the lows of the previous day where enough support was found to push prices back into the plus column on some shot covering but this improvement was short-lived with prices soon turning south again and this time making new lows for the move. Support was eventually found just below 22.50 with the market ticking higher during settlement on day-trader short covering to allow prices to close 20 points off the lows. The structure continued to weaken with the NV losing 8 points to close at -3 with two days to go until expiry of the N-23. The OI dropped to 26,245 lots with another 10,219 lots traded yesterday continuing to suggest a relatively small delivery of, perhaps, around 500k tonnes. The VH also lost ground to close 4 points lower at -5. In London, it was a slightly different story with the structure strengthening. The QV push back to a premium ending at +1.40 as did the VZ which ended at +1.10. this meant the WP also improved with the VV WP finishing at 129.10 and the VZ WP at 128.00. There appeared to be some tentative bottom picking yesterday after the very steep declines seen recently. However, further fund liquidation ensured prices ended at the lower end of the day’s range. Nevertheless, there were signs the selling was becoming thinner with some reasonable buying building below 22.50. The fact that London’s structure improved may encourage the bulls who have taken a battering recently.

The Indian Government announced yesterday an increase in the floor price that mills must pay for cane for next season. An increase from 305 rupees per 100g to 315 rupees per 100g will be in place from 1st October. It is usual practice for the floor price for cane to be raised every year but it will be seen as more poignant this time as there is a general election early in 2024 and President Modi will be wanting to entice farmers who make up a large percentage of voters. The increase paid for cane by mills is likely to encourage cane plantings. Therefore, so long as monsoon rains are adequate then it is likely a large production of sugar could be seen next season which may match the record production in 2021/22.

This morning the market opened 6 points firmer but immediately turned lower. Currently, prices are 14 points lower. The NV and VH are both unchanged at -3 and -5 respectively. In early London trading the QV is unchanged at +1.40 while the VZ is a tad firmer at +1.30. The macro is a mixed picture today. Crude is slightly lower while grains/soya are higher. The USD index is a little stronger while the BRL ended slightly weaker at 4.85 yesterday. The market continues to look weak and further losses look likely. However, the market is getting, technically, over sold so a correction may be seen before too long but it is difficult to predict from what level. The weakness in the spot month is not helping the bull’s cause so, perhaps, they will have to wait until after its expiry for any lift in prices.