Sugar Market Report for 1 September

Good morning,

The market dropped yesterday after forming a double top in early trading with a combination of lack of demand and negative macro weighing on prices. The market had opened 8 points firmer which turned out to be the high of the day and formed a technical double top at 20.30. Prices immediately started to ease lower dropping through the 20 cents level around mid-day which saw a couple of small sell-stops triggered. The decline continued with the lows of the day being hit mid-afternoon as further small stops triggered as the 19.80 level was breached. Eventually prices made a small and slow recovery ending the day some 10 points off the lows but back into the range seen much of the previous fortnight. The VH slipped again, losing 8 points, to end at its lowest level of -71. The HK also dropped 11 points to finish at +73. In London the VZ tumbled again to finish at -25.00 while the ZH also finished slightly weaker at -9.70. This meant the WP remained weak with the VV WP finishing at just under 46.00 while the HH WP ended the session at 65.00. Much has been said about the decline in output from Brazil’s CS this season due to dry weather and frost damage but physical demand remains very muted which is now counteracting against the bullish Brazilian news. The front month fell to its largest discount against the rest of the board yesterday which is hardly the recipe for the rally to continue. The macro was also negative yesterday which saw grains/soya lower on better weather prospects across the US main growing regions.

According to India’s Meteorological Department (IMD) the country is likely to see above average rainfall in September. This will be welcome news to many farmers. After an excellent start to the monsoon rainfall became patchy during July and August with rainfall some 9% below average by the end of August. The expected rains will boost the overall rainfall back to around the lower end of normal. If rainfall is sufficient to get back to around average it will be the third consecutive monsoon at or above average.

Two large sugar refineries in Louisiana which were shut down before hurricane Ida hit the state on Monday were still not operational yesterday as damage was assessed and power restored. However, damage is not thought to be extensive. There has also been some chatter of cane damage in the state but, again, it is not thought to be extensive and will be assessed over the coming days.

This morning the market opened 9 points firmer before improving further on the back of a slightly positive macro picture. Currently, prices are holding around 7-9 points firmer. The VH is 1 point firmer at -70 while the HK is 2 points better at +75. In early London trading the VZ is weaker again at -25.40 while the ZH is a tad firmer at -9.40. The macro is mixed this morning with crude firmer while grains/soya are around unchanged to slightly lower. The USD Index is also slightly firmer. The market looks likely to try to consolidate after failing to break above the 4 ½ years highs seen in the middle of August. Nevertheless, there would seem little reason for prices to collapse with buying likely to be found at below 19.50. The up-side target is now the double top at 20.30.