Sugar Market Report for 14 July

Good morning,

Yesterday saw the market finished higher for the first time in a week but not before making a new low for the move. The market had opened 10-11 points firmer and quickly improved another 12 points on further market buying to hit the day’s highs. However, once this early buying dried up prices soon dropped back and were soon in the negative column. Prices continued to drop lower as fund selling met with limited scale down buying. The lows of the day were reached mid-afternoon but with support seen at 16.75 some day-trader short covering emerged which pulled prices off the lows and triggered some more substantial buying which saw prices soon push above 17 cents. The market, eventually, settled in the top half of the day’s range although, again, the overall flat prices volume was underwhelming. The VH gained a couple of points to end at -41 while the HK finished unchanged at +71. In London the QV improved by nearly $1 to -27.00. With three sessions before expiry the Q-21 OI dropped to 7,775 lots with another 6k lots traded yesterday. The VZ also finished slightly firmer at -8.00. This saw the VV WP end unchanged at 65.30. However, the HH WP improved to close at around 78.00. The market managed to recover from early losses as the long liquidation seen over the past few sessions subsided. It was a relatively good performance given the strength of the USD yesterday which improved as US inflationary fears flared again.

As forecast the Indian monsoon has improved over the past few days. After a good start when the rains spread to all but the last third of the country and rains were above average for the first three weeks of June the wet weather appeared to stall and become very patchy. Over the past few days the monsoon has now covered the whole country which is about 5 days later than average and bodes well for planting of their summer crops. If the monsoon remains good through to September then it will be the third year in a row of average monsoon rains making the drought years of 2014-2015 a distant memory. Currently, sugarcane planting is going well up just under 2% from same time last year.

This morning the market opened 16 points firmer on market on opening buying. However, prices have now fallen back after the early buying dried up. Currently, prices are around 5 points firmer with the VH a couple of points firmer at -39 while the HK is also two points better at +73. In London the QV is around unchanged at -27.00 as is the VZ valued around -8.00. The macro is a mixed picture this morning with crude slightly lower while grains/soya slightly firmer while the USD Index is around unchanged. The sugar markets saw some signs of support yesterday at the lower levels which triggered some light short covering. It is likely a period of consolidation will be seen with the bias on the up-side although any significant rally developing would seem unlikely while the spot months remain at such a discount. Nevertheless, serious questions remain over the Brazilian CS crop with the dry weather and recent cold weather likely to have a continuing impact on the crop.