Sugar Market Report for 31 May

Good morning,

Yesterday was a quiet day with NY closed for the Memorial holiday although London made further gains albeit in thin volume. The market opened unchanged but soon pushed higher soon making new highs for the move and hitting levels not seen since the middle of April. The market eventually found some resistance at 575.00 although it was momentarily breached late in the session the market closed strong. The QV improved again to settle at +18.00 while the VZ was also firmer at +13.10. The main reason for the recent strength in whites appears to be the capping of Indian exports at 10 million tonnes which could restrict the availability of deliverable white sugar. It has also been noted that several gulf refiners are working below capacity and Algeria ban on sugar exports remains in place. Also news that Turkey will allow as much as 400k tonnes of sugar imports duty free may have also pushed London higher. On the flip side Pakistan is looking to export as much as 500k tonnes.

As the Indian monsoon starts the IMD has predicted that the country is likely to receive normal monsoon rains this year. They see 103% rainfall of the long-term average this year. This will be the fourth consecutive monsoon which has been favourable. This means that the rivers and reservoirs are already at good levels which bodes well for the next sugar cane harvest.

This morning the market opened 19 points firmer but immediately gained another 10 points as NY attempted to catch up with yesterday’s gains in London. Additionally, crude prices are higher as the EU agrees to further Russian oil sanctions. Currently, prices are 25-26 higher. The NV and VH are both 1 point firmer at -13 and -24 respectively. In early London trading the QV is a tad weaker at +17.60 while the VZ is also lower at +12.80. The macro is relatively positive this morning with, as mentioned, crude firmer as is soya although wheat is lower. The USD Index is firmer but now well off the highs seen earlier in the month. NY Sugar gapped higher on the opening and is likely to remain firm on London’s strength and the positive overall macro picture. However, from a fundamental perspective it is difficult to argue for prices to race higher. Nevertheless, if the funds decide to add to their longs then prices could quickly push above 20 cents. The gap left this morning will be the downside target in the short term (19.73 – 19.80).