Sugar Market Report for 7 July

The market managed to push above Friday’s high in early trading resuming the up-trend. However, a general sell-off across commodities and especially agricultural commodities hit sugar as well with prices taking lower mid-afternoon. The market had opened 20 points firmer after the gains seen in London on Monday when NY was closed. The market then settled into a narrow 12 points for the morning. However, as US traders got to their desks prices did falter and dropped back to their opening levels. There was a brief recovery but a more concerned sell-off developed mid-afternoon as the grains markets started to tumble on expectations that the US Fed may begin to cut its bond-buying earlier than expected. A better weather forecast across parts of the US will higher rainfall also had a negative impact. Sugar prices remained under pressure through to the close with prices eventually settling just 5 points off the lows and lowest settlement since 29^th June. While the flat price sell-off was triggered by the macro the spot V-21 was already under pressure earlier in the session with the VH dropping away eventually ending 11 points lower at -33 and a new low. The HK also ended 6 points weaker at +84 but this was mainly on the flat price drop. IN London the structure also remained weak with the QV slipping to -25.20 while the VZ finished unchanged at7.90. The macro continues to dominate proceedings with concerns about the situation in Brazil’s CS battle with dry and cold weather being side-lined for the time being. The chatter about the damage caused by frost is still being assessed although Archer Consulting said the frosts of last week might not have caused significant damage to the cane fields.

The European Commission reported yesterday that they see EU Sugar production increasing this season leading to an increase in stocks. In their short-term outlook the Commission said they saw sugar production rising to 15.5 million tonnes in 2021/22 up from last season’s 14.50 million tonnes. Sugar beet yields are seen at 74 tonnes per hectare in-line with the five-year average but 10% above last season that was hit by dry weather across some of the major growers. Despite early issues with late frosts causing damage in France the beet area is also seen rising by 1% to 1.5 million hectares which suggests much of the affected area was re-sown. It was also reported that the cold spring had reduced pest and disease which may also help improve yields.

This morning the market opened 2 points firmer before immediately improving another 19 points on some good market on opening buying as traders try to concentrate on the fundamental picture which remains supportive. Flat price is some 20 points higher at the moment. The VH is a couple of points firmer at -31 while the HK is 1 points firmer at +85. In early London trading the QV is firmer at -23.10 while the VZ is unchanged at -7.90. The macro is mixed this morning with Crude firmer as are metals while grains/soya remain resolutely negative on continuing better weather forecasts in US. The USD Index is unchanged while the BRL dropped against the USD yesterday to its lowest level since early June ending at 5.21. Despite the macro Sugar looks likely to remain firm with the down-side remaining limited. However, with the front spread weak and the funds having limited appetite to buy the market may struggle to challenge the 18.50 level nearly reached last week.