Sugar Market Report for 9 September

Good morning,

The market remain range-bound again yesterday giving back all the gains of the previous two sessions as the index fund roll started in earnest. The market had opened unchanged but swiftly gained another 14 points on the seemingly daily market on opening buying. Once filled prices dropped back soon falling into the negative column. The flat price did improve again during the afternoon to hit the highs of the day but enough selling above 18.20 soon halted the gains with prices soon falling back to hit the lows of the day shortly before the close. However, the market essentially remains within the range of the past three weeks. The VH slipped 2 points to finish at +21 while the HK lost 7 points to end at +47 its lowest level in over a year. Increasing Brazilian production suggests physical tightness may not be as acute as some had expected. In London, the spot V2 contract remains very firm with the VZ jumping to +46.50 as the shorts without sugar to deliver are forced to cover while the longs are keen to receive. This spread looks set to improve further. The OI in the V2 dropped to 16,827 lots on Wednesday with another 7,289 lots traded yesterday continuing to suggest, understandably, a small delivery. The ZH was also firmer ending at +28.80. This meant the WP improved to new highs with the VV WP hitting 185.00 while the VZ at 138.40. The HH WP remains rather lower at 114.00. The flat prices continues to be influenced by the macro while there is no significant fresh fundamental news. Crude prices dropped again in early trading. WTI hit its lowest level since January as concerns over renewed Covid lockdowns in China will hit demand further. The flat prices has remained in a relatively narrow 110 point range the past five weeks suggesting the market is content for prices to hold around 18 cents.

The US Government weather forecaster has issued it monthly La Nina advisory report. They see La Nina continuing through the Northern Hemisphere winter before receding with the chance of continuing into January-March at 54%. Currently, it seems to be having little impact on Brazilian weather with good episodes of rain across the CS next week. In India, the monsoon is winding up to finish with good late rains.

This morning the market opened 8 points firmer as the usual market on opening buying appeared and a weaker USD. Currently, prices are 7 points firmer. The VH is 2 points firmer at +23 while the HK is unchanged at +47. In early London trading, the VZ and ZH are unchanged at +46.50 and +28.80 respectively. The macro is a positive picture this morning with the USD Index taking a hammering which has helped lift most commodities. The USD Index is over 100 points lower as the EU hikes their interest rates and the US awaits inflation data next week. The market should find some support from the macro but it would seem unlikely that the flat price will move out of the 18.30 – 17.80 range for the time being. London seems set to remain firm with short covering likely to see the spot month continue to improve against the rest of the board.