Sugar Market Report for 6 September

Good morning,

London steamed higher yesterday while NY was closed for Labor day holiday. On Friday NY ended higher but ended well off the day’s highs and in the range for the past couple of weeks. All eyes remain on the London market which hit seven-week highs yesterday as the V2 expiry looms. The entire range of the day was seen in the first 5 minutes of trading with the market gaining $8.80 in that time and making new contract highs. The market then quietened considerably and dropped back towards opening levels. During the afternoon prices did improve again but still remained within the range set on the opening. Nevertheless it was a strong performance with the VZ improving to +42.20 another contract high by the close while the ZH was also firmer at +25.80. With 8 trading sessions before expiry the Open Interest stood at 24,246 as of COB Friday with another 3,754 lots trading yesterday. It would seem likely the London market will continue to climb. A combination of tight near-by supply of physical white sugar, good demand as end-users re-stock after letting stocks run down during the pandemic and when freight rates soared. Additionally, export restriction from India and other producers plus concerns over the EU beet crop due to hot and dry weather have combined to see the shorts who cannot deliver being squeezed. NY has been the poor cousin remaining within a range with the view that the new season will see a production surplus as Brazilian CS production looks set to exceed last year’s 32 million tonnes. However, the VH remains at a premium and could improve further with the V2 expiry at the end of the month.

The COT as of the 30^th August saw the funds/specs cut their net short position by 16,638 to just 11,597. This reduction was probably in line with expectations as the market improved just under 60 points during the reporting period. The non-commercials cut their net short position by 7,474 to 22,718. Currently, they are probably around 20k net short suggesting the fund managers are happy to deploy funds elsewhere for the time being as the up and downside looks limited. The commercials increased their net short position by 17,954 to 173,543 as the trade liquidated longs and some light producer selling noted on the sell side. Currently, end-users are relatively well priced so under no pressure while producer selling is likely to appear if prices rally back above 18.50. The Index funds increased their net long position by 1,316 to 185,140.

This morning the market opened 9 points higher on some market buying but once filled prices quickly fell back dropping into the negative column before improving. Currently, the market is 3 points firmer. The VH is 3 points firmer at +17 while the HK is 1 point firmer at +55. In early London trading the VZ is lower at +40.90 while the ZH is firmer at +27.40. The macro is mixed this morning with crude firmer, grains/soya mixed and the USD Index unchanged and the BRL valued around 5.1550. London looks set to push higher so also likely to support NY which does not seem to have to will to move too far from current levels with producer selling above 18.50 and buyers awaiting a drop to 17.75.