Sugar Market Report for 7 June

It was a story of two markets yesterday as NY recovered after dropping over the previous 5 sessions while London dropped again. The NY market had opened 4 points firmer before improving further only to drop back into the negative column an hour later. However, this drop turned out to be the low of the day as prices quickly improved as the front spread also improved. The market remained volatile during the afternoon but eventually improved on the close to settle in the top half of the day’s range also gaining another 6 points during the post settlement period.
The NV improved by 8 points to end at +29 while the VH was 3 points firmer at +17. However, in London it was a different story. Early strength, in line with NY, disappeared during the afternoon when consistent selling took prices down to their lowest level since 18th April. Values did recover later in the session but still settled well into the negative column. The structure also weakened with the QV down to +5.10 and the VZ down to +8.70. There seemed little reason for the weakness in London especially as NY was pushing higher. Perhaps it was just a case of some selling needing to be done and things may correct today. The WP also took a beating with the VV WP ending over $6 down at 130.30 while the VZ WP ended $4.60 weaker at 121.60. The improving structure in NY seemed to be the catalyst for the flat prices to also improve. The funds appear to have finished their long liquidation for the time being. It is likely they are around 110k lots net long so, perhaps, the core long is happy to hold.

As mentioned little fresh fundamental news. The weather remains the focus. It has dried up in Brazil’s CS so allowing the crush to continue apace. Estimates for total sugar production appear to be increasing. The cane is in excellent condition and the sugar split will remain high. So it will be the weather that could cause issues. Perhaps cold weather may cause damage as seen a couple of seasons ago or possibly the tail of the harvest will be short as last season if rains arrive too early – the possibility is probably higher than normal given the probability of El Nino developing. However, if the weather remains kind then some analysts are already pencilling possible record production in 2024/25. Across in India the monsoon is stuttering but should arrive soon. It will be not until the end of July that any certainty can be formed on the monsoon although many are likely to have their say well before. A good monsoon will bode well for the 2023/24 season which could see similar production to 2021/22. However, just a good monsoon is not always sufficient as the current season proved with production around 3 million tonnes less due to cloudy weather during the maturing of the cane.

This morning the market opened 10 points firmer (somewhat catch up from the last print last night) before improving further. Currently, prices are 13 points firmer. The NV is unchanged at +29 while the VH is 2 points firmer at +19. In early London trading limited recovery seen as yet. The structure is slightly firmer with QV at +5.60 and the VZ is unchanged at +8.70. The macro is a somewhat negative picture with most commodities lower while the USD Index is slightly stronger. Crude remains weak despite the Saudi production cut announced over the weekend. The BRL was firmer yesterday at 4.91. The selling that has taken prices down 160 points since last week appears to have now dried up and shot covering has seen prices improve with little selling resting above the market. However, it would probably seem unlikely a significant bounce will develop. Fund roll is now in full swing and the big trade houses will be manoeuvring positions in front of the N-23 expiry.