Sugar Market Report for 3 August

The market gave much of the gains of the previous session as the market sought to consolidate. The thin trading volume is an indication of traders’ uncertainty of direction. The market had opened unchanged before quickly improving to hit the highs of the day in early trading before immediately dropping back to opening level as the early buying dried up. The market then remained either side of unchanged until US traders got to their desks when more persistent selling appeared taking prices firmly into the negative column. The lows of the day were reached mid-afternoon before improving slightly to settle in the bottom half of the day’s range but some 10 points off the lows. The spread action was limited with the VH losing 1 point to end at -19 and the HK losing 2 points to finish at +134. In London, things were more buoyant with the structure continuing to improve. The VZ ended at +13.50 its strongest level since the end of May while the ZH was also firmer at +13.90 its highest level since the beginning of June. This meant the WP also improved with the VV WP at 163.70 while the VZ was firmer as well at 150.20. The WP is now back to month highs. Traders appear unsure of where the market moves next. The weather, as mentioned ad infinitum, is critical to global production. Currently, Brazil’s CS is very limited rainfall which is beneficial to the current crush. Rainfall across India, Thailand, China and Central America has picked up and aiding the cane. In Northern Europe, the weather has also been reasonable allowing for the beet to improve. Currently, El Nino does not seem to have much influence but, of course, that can change quickly. However, physical off-take is decent which is more reflected in the London market.

This morning the market opened 1 point higher before improving immediately. However, once this early buying dried up prices fell back to unchanged before improving as London opened. Currently, prices are 9 points firmer. The VH is 1 point firmer at -18 while the HK is 1 point weaker at +133. In early London trading the structure is firmer again. The VZ is at +13.80 and the ZH at +14.60. The macro is a distinctly negative this morning with most commodities lower as traders continue to digest the news that the US government’s credit rating has been downgraded by Fitch from AAA to AA+. The USD Index is firmer again now some 3% above the lows reached in the middle of July. The BRL weakened to 4.80 yesterday. The market looks likely to tread water at around current levels as traders await further fundamental news. However, the strength seen in Whites will certainly by supportive and may encourage NY to push higher on the up-side. The low trading volume is likely to see continuing daily volatility.