Sugar Market Report for 30 August

The market took a breather yesterday after the big move higher over the previous four sessions although a new high for the move was put in place. The market had opened 4 points weaker but soon improved to put the highs of the day in place. The market then remained caught in a narrow 15 point range until late in the morning when prices dropped back on some light long liquidation aided by a negative macro. However, prices soon improved back to just above unchanged before slipping back by the close. The trading volume was pretty decent again. The structure weakened slightly with the VH dropping 6 points to end at -31 while the HK was 4 points lower at +141. London gapped higher on its opening after being closed on Monday catching up with the gains seen in NY. However, it was relatively quiet. The VZ slipped to +11.50 while the ZH was also weaker at +10.50. Nevertheless, the WP held firm with the VV WP finishing at 163.80 and the VZ WP at 152.30. It was a bit of an anti-climax yesterday after the big gains seen recently when the market stalled. Nevertheless, the market never looked likely to collapse with good support seen at 25.25 and below. Concerns over weather across Asia and in Brazil will ensure prices remain firm for the time being.

The weather across Brazil’s CS will be critical over the coming weeks. Too much and the harvest will be hampered which could jeopardise sugar production just as the world is relying on Brazilian sugar. There is some rain forecast from tomorrow for a few days but interspersed with drier conditions. It does look as if by the middle of next week the weather will become dry again allowing harvest to proceed unhindered.

Citi bank’s commodity analysts see sugar prices staying strong for a long period and new highs may be reached. In their monthly report, they see the average price for the last quarter of 2023 at 25.50 which has, of course, already been reached. They see the funds building a larger long position with prices perhaps reaching 27-30 cents. Lower rainfall across India and Thailand due to El Nino which may cut production expectations further.

This morning the market opened 6 points lower before improving back to unchanged. Currently, prices are 6 points higher. The VH and HK are both unchanged at -31 and +141 respectively. In early London trading the VZ is higher at +12.10 as is the ZH at +11.50. The macro is fairly mixed with crude slightly highs while grains/soya are all either side of unchanged. The USD Index is stronger while the BRL ended at virtually unchanged at 4.86 last night. The market looks well supported at the moment so the downside looks restricted. With concerns over El Nino raging across the world, there is good scope for prices to move higher. Much will depend on the funds’ view of the market. If they decide to increase their longs further then prices are very likely to improve with limited producer selling above the market, especially in the spot month. The double top formed in June at 26.18/19 is the next upside target.