Sugar Market Report

Friday saw the elusive 13 cent level hit but it was a fleeting visit with prices soon dropping away on long liquidation. The market had opened unchanged before slowly slipping lower on some early profit taking. However, good support was seen around 15 points below settlement which encouraged some fresh buying to appear. This buying took prices back to the highs seen the previous two sessions but, although 13 cents was hit, the buying was soon absorbed by good producer selling and the day traders soon reversed positions quickly taking prices down to the earlier support. However, this time the recovery was brief and prices soon dropped another 15 points to hit the lows of the day on the close as further enforced long liquidation was seen. The trading volume was better than of late but still hardly over whelming at 152k lots. The VH ended a couple of points weaker at -58 while the HK was 4 points firmer at +30 mainly on better producer selling noted in K-21. In London he VZ slipped to virtually flat while the ZH was a tad better at +1.40. This put the VV WP firmer at 93.00 while the HH WP was also $1 higher at 78.70. The long anticipated test of 13 cents was, in the end, rather disappointing with no follow-through buying of note with prices dropping back towards the lows seen on the close Wednesday. The macro did not help with the USD strengthening throughout the day which meant most commodities were lower. Nevertheless, a higher range has now been established and another push higher looks more likely than a collapse back to 12 cents.

The COT as of the 4^th August showed That the funds/specs had increased their net long position by a whopping 54,055 to 148,308. The non-commercials increased their net longs by 40,970 to 111,440 their largest net long position since the start of the pandemic. In normal times the funds would have ample ammunition to increase their longs but they maybe more hesitant in these uncertain times. The commercials saw an increase of 47,996 in the net shorts to a total of 385,005 as producers sold and end-users remained, by and large, side-lined. The end-user pricing is getting well behind but they are probably not going to panic yet. The index funds cut their net longs by 6,060 to 236,696.

France is suffering from viral beet jaundice on their beet crop. The virus is carried by the green viral aphid which was previously controlled by neonicotinoid seed treatments. The ban on using neonicotinoids is the primary reason for the huge damage being caused across certain beet growing regions of France. It is estimated up to 30,000 hectares has been impacted with damage estimated to be around 1000 euros per hectare. Beet growers are demanding help from the Government. It is likely the Government will loosen the pesticide ban for next season for use on beet. The ministry of Agriculture will also offer compensation to farmers impacted by crop losses this year.

Further heavy rains across Thailand have improved cane prospects for a bigger harvest with some regions receiving up to 20% more rainfall so far this year compared to last year. There has been much talk about how the back to back droughts over the past two years will mean their cane crop will be the smallest in a decade. More rains in August and September are forecast which may well help the cane but because of a severe cut in the planted area it is unlikely to have a huge impact on total sugar production.

The dry weather across Brazil’s CS which has allowed the harvest to continue unhindered for many weeks may come to an end before too long. There has been growing concerns over the dry weather and how it might impact next season’s cane. However, rains are forecast for later this week across most sugar cane regions with Sao Paulo expected to see up to 100mm of rain which will help soil moisture levels, although, will of course, hamper the harvest.

The Trading Corporation of Pakistan has issued an International tender to purchase 300k tonnes of white sugar it was reported over the weekend. The tender closes on August 18^th and is for worldwide origins. This news was flagged up last week and was one reason for the price improvement.

This morning the market opened 8 points lower on some further selling after the weak close on Friday. Prices have improve a little and currently are around 5 points weaker on the day. The VH is a tad weaker at -60 while the HK is unchanged at +30. In London the VZ is virtually unchanged at +0.20 while the ZH is firmer at +1.70. This morning the macro is positive with most commodities slightly firmer. However, the USD is a tad firmer again and the BRL ended Friday at 5.44 its weakest level since the middle of July. Having failed to break out above 13 cents the market may need a breather for a while. However, as mentioned above, another attempt to break higher looks more likely than a return towards 12 cents especially as end-users are behind with their pricing. It is unlikely any heavy selling will be encountered above the market until 13 cents is reached so another bout of fund buying could quickly see prices improve.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598

Email: admisi.sugar@admisi.com

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