Sugar Market Report for 8 August

The market improved Friday to settle at its highest level since 21^st July aided by a strong London market. The market had opened 11 points firmer, improved another 10 points before running into some initial resistance at 17.75. This triggered some light long liquidation which saw prices dip close to the previous sessions settlement where support was found. Eventually, prices started to improve with good gains from mid-afternoon as short term funds covered shorts. The market settled near the highs and some 74 points above the lows reached on Monday. The VH improved 5 points to -8 while the HK strengthened 3 points to finish at +61. In London the VZ made a new high reaching +36.40 before slipping back to settle at +33.90 which was a new high. The biggest move was seen in the ZH which catapulted out of its recent range pushing over +19.00 before settling at +18.60. News that India exporters would be able to export an additional 1.2 million tonnes which would be nearly all raws was seen as one reason for the strength along with a continuing tight physical market. The WP also improved again. The VV WP ended at 155.40 while the VZ was valued at 121.50. Friday’s move higher in NY had been anticipated with three consecutive higher lows and highs. The strength in London also added to the improving sentiment and a push above 18 cents would now seem likely.

The COT as of the 2^nd August showed the funds/specs had increased their net short position by 24,534 to 65,642 during a week when the market dipped to one year lows so the increase will have been largely anticipated. The non-commercials increased their net short position to 67,388. This is their largest short position this year and is probably around the limit in the current uncertain market conditions. Given prices have improved over the past three sessions some fund short covering will have been done but they are still likely to be over 55k lots net short. The commercials saw their net short position cut by 33,032 to 120,241 as end-users continued to take advantage of the weak prices to price and should be fairly content at the moment. The Index funds cut their net long position by 8,498 to 185,882.

France’s farm ministry cut its estimate for their beet planted area on Friday dropping to total area by 1k hectares to 396k hectares. While the recent weather has not been kind it is thought that it may have limited impact on the beet with Tereos reporting earlier last week they see yields may exceed the average for the past five years.

This morning the market opened 2 points firmer in quiet trading. Currently, prices have improved pushing through the 18 cent level and are 15 points firmer. The VH is unchanged at -8 while the HK is 1 point firmer at +62. In early London trading the VZ is firmer at +35.70 while the ZH is slightly weaker at +17.60. This morning the macro is mildly positive with crude higher, grains/soya mixed and the USD Index slightly weaker. The BRL improved late last week to close on Friday at 5.16. The market looks set to improve further with 18 cents the first resistance level. Assuming there is not a large deterioration in the macro the funds may decide to cover more shorts. There is likely to be limited resting selling above the market. London looks set to remain firm adding to the improving sentiment.