Sugar Market Report for 15 June

Good morning,

The market dropped to a fresh one month low yesterday although managed later to fill the chart gap left on the previous session’s opening. The market had opened unchanged but swiftly fell lower but managed to hold the previous day’s lows. The market then remained within a 13 point range for much of the session dipping to the day’s lows mid-afternoon before improving back to unchanged by settlement. Oddly, a post-settlement market buy order pushed prices nearly 20 points higher which, at least, allowed the chart gap to be filled in the spot month although not on the V-22 chart. Now the majority of the fund rolling is done the NV is improving gaining another 5 points yesterday to end at -10. The VH also improved 3 points to finish at -38. In London the bulls continue to dominate the spot month as it gained another $3.50 on the day although still $30 lower than the highs hit last week. This meant the QV improved to finish at +28.70 while the VZ was also firmer at +18.00. The WP also improved with the VVWP ending at 125.90 and the VZ WP at 107.90 although interest was minimal with no block trades. The late surge higher withstanding the market was quieter than of late only slipping marginally to make a new low for the move. The stabilising of the macro helped after two wretched days. The passing of the capping of the ICMS tax bill by the Brazilian Senate had little impact as the market appeared to have already taken the view that it would pass. The strength in London is also adding some support to raws as end-users price.

In India mills are urging the resumption of sugar exports when the new season starts at the beginning of October. ISMA has, apparently, written to the Government stating that as the planted area of cane maybe around 2% higher than last season and with a normal monsoon it is likely that India could produce another huge amount of sugar and similar if not slightly higher to the 36 million tonnes that is likely this season. ISMA argues that giving mills a mandate to start export sales for 2022/23 will allow them to plan ahead and sign contracts at good prices. Given that Brazilian production is likely to improve in 2023/24 it suggests there will be more than adequate supply of sugar next year.

This morning the market opened 4 points lower and is currently holding at 6 points weaker. The NV is 1 point weaker at -11 while the VH is also 1 point weaker at -39. In early London trading the QV is slightly weaker at +27.50 while the VZ is a tad firmer at +18.40. The macro is a mixed picture this morning with crude barely changed and grains/soya also slightly lower. The USD Index is over 50 points lower as it corrects from the 20 year high hit yesterday. The BRL finished weak at 5.12 last night. The market has been hit with bearish news and factors recently which has seen prices fall over 160 points since hitting 20.24 cents just under a month ago. Higher production expectations in Brazil, weakening BRL, capping of ICMS tax not to mention chatter of higher Indian and Thai production next season coupled with a negative macro and surging USD have all weighed on prices. However, all this has been absorbed into the market so some support should be seen below 18.60 for the time being assuming the funds are happy to hold their residual long position which is probably around 70k net long at the moment. There is still concerns over Brazil’s sugar production for their current season and the Indian monsoon could yet be disappointing. However, the up-side looks distinctly limited especially while the risk-off attitude remains.