Sugar Market Report for 9 August

A new low for the recent move down was seen yesterday as poor economic data from China weighed on all markets. The market had opened 4 points lower and continued to fall partly because of the weak close the previous session. That was the story for the rest of the session as prices remained under pressure dropping to the lows of the day about an hour before settlement before some limited short covering pulled prices off the lows for the market to close 16 points above the lows and above the previous day’s low. The structure weakened more as a consequence of the weak flat price with the VH losing 3 points to end at -25 its lowest level since the end of October. The HK also dropped 5 points to finish at +124 its lowest since the end of June. In London the front month improved with the VZ up $3 to +12.20. However, the ZH was $1 weaker at +11.00. The WP also improved with the VV WP up $3 to 162.50 and the VZ WP slightly higher at 150.40. The market came under pressure from the off as the news that China’s imports and exports had dropped significantly in July compared with a year earlier and suggests the recovery of their economy will be slower and flatter than anticipated. Nevertheless, there seemed no significant fund selling and it was the short term traders that pushed prices lower.

Limited fresh news around. The weather remains favourable for crushing or growing and it will be many weeks until an accurate figure will be available for how much sugar Brazil will produce and how much sugar India and Thailand are on target to produce. There appears to be a general consensus that a deficit in production over demand will be seen in 2023/24 but how much will not become apparent for several months although traders will continue to second guess. Many believe that it is likely to grow.

Egypt’s strategic reserves of sugar are sufficient until the beginning of March according to the Egyptian supply ministry reported in a statement yesterday.

This morning the market opened 20 points higher but soon slipped back only to then recover. Currently, prices are 21 points higher. The VH and HK are both unchanged at the moment at -25 and +124 respectively. In early London trading the VZ is slightly weaker at +11.80 while the ZH is a tad stronger at +11.30. The macro is a more positive picture this morning with most commodities trying to recover from yesterday’s sell-off. However, crude is barely changed while Grains/soya are higher apart from wheat. The USD index is lower while the BRL ended weaker at 4.90 last night. The weakness yesterday was mainly on the back of the negative macro picture and not a result of any bearish fundamental news. Indeed, the news that several analysts are seeing a deficit for next season should be supportive and will continue to suggest the upside is more favourable than the downside at current levels. Much will depend on the funds’ view of the market. They have probably liquidated enough of the longs since the market turned last month although unlikely to immediately start to reinstate.