Sugar Market Report for 30 June

The market took another tumble yesterday to its lowest level since early April and ended some 440 points off the highs of just eight sessions ago. The market had opened 6 points higher but soon fell away soon testing the lows of the previous day where some support was found. This prompted some short covering which saw prices push up into the plus column again and hit the day’s highs. Prices then held steady to the afternoon when more selling appeared with some sell stops triggered at 22.25. This took the market down to 22 cents where there was some initial buying but this was eventually absorbed with prices then losing another 19 points down to the lows of the day. However, a decent bounce was seen on the close with the market pulling off the lows to settle some 27 points off the lows. During the post-settlement period the market gained another 16 points. The NV gained 2 points to end at -1 while the VH took a more substantial drop of 10 points to end at -15. In London, the structure was firm again with the QV up over $3 to finish at +4.80 while the VZ was $1.50 stronger ending at +2.60. The VV WP was unchanged at 129.00 while the VZ was slightly weaker at 126.40. Yesterday’s drop in price was, probably, heavier than expected but there is little support in the market. Despite pushing into over-sold territory the fund selling continued. Tonight’s COT report should show there has been some significant fund liquidation. It should also show that end-users have taken the drop in prices as an opportunity to price.

Limited fresh fundamental news around. The weather in Brazil’s CS remains dry and conducive for the crush. It is raining in India as the monsoon covers the whole country. It has been raining heavily across Maharashtra but rainfall across Uttar Pradesh has been limited so far but expected to pick up over the next couple of weeks. This combination of good weather is one major reason for the crash in prices.

The artificial sweetener, Aspartame, is set to be officially classified as “possibly carcinogenic” by the International Agency for Research on Cancer later this month. Aspartame is used to reduce the calorific content of thousands of products from diet fizzy drinks to chewing gum and food products. There has been concerns over Aspartame for several decades but has not, until now, been classified as potentially harmful. How this issue plays out remains to be seen. The sweetener industry will continue to insist it is safe on the basis of many trials over the years. However, how it impacts on consumption of products containing Aspartame remains to be seen but it is likely to be negative. While there are other artificial sweeteners they are either incompatible or also have questions over their safety as well. One way or the other it should be good news for sugar consumption.

This morning the market opened 10 points higher but at the same level as yesterday’s last print. Further buying appeared pushing prices higher. Currently, the market is 40 points higher. The NV is -1 and the VH is -12. In early London trading the QV is +6.00 while the VZ is at +3.20. This morning the macro is a positive picture with most commodities trending higher, especially grains/soya. The USD Index is unchanged while the BRL ended a tad firmer yesterday at 4.86. Has the market done enough on the down-side? Bottom picking is very difficult and some will have been caught out over the past couple of days. However, some had been predicting a large pull-back was on the cards and some had felt 22 cents may be the downside target which was achieved yesterday. Any correction could be exaggerated as there is likely to be limited resting selling above the market. Today sees the expiry of the N-23 contract. The OI dropped to 19,928 lots with another 23,804 lots traded yesterday. Currently, it would seem around 500k tonnes might be delivered.