Sugar Market Report for 9 September

Good morning,

Good morning,

The market ended at the bottom end of the day’s range after a double bottom was put in place at 19.44/45 earlier in the day as BRL weakness weighed on prices. The market had opened 2-3 points firmer before improving another 7 points but these initial gains were soon wiped out with prices dipping to the lows of the previous session. Buoyed by the support found at these lows the speculative buyers slowly reappeared with prices improving throughout the rest of the morning culminating it hitting the day’s highs just after US traders got to their desks. However, with the BRL weakening on renewed political turmoil, prices started to fall with all the gains wiped out over the rest of the session culminating in the market ending near the lows. The VH gained 8 points to finish at -59 which allowed the spot month to settle with a 1 point gains while the rest of the board was lower. The HK slipped 3 points to end at +54. In London the VZ finished slightly better but still at a deep discount of -21.30 with a week to go until the expiry. The OI in V-21 dropped to 15,232 lots with another 5,950 lots traded yesterday suggesting the delivery will be small again. The ZH ended unchanged at -9.40. This meant the WP slipped with the VV WP ending at 51.80 and the HH WP at 69.50. The market remains range bound but looks in danger of slipping out of the range on the downside although there would seem no reason for any serious collapse from a fundamental perspective.

Despite concerns that the Brazilian CS sugar output might plummet by over 6 million tonnes compared with last season there appears to be diminishing demand which is reflected in the spot month discount. Brazilian shipments are falling. The current line-up is just 1 million tonnes with total exports for the year marginally higher than the previous year but now falling. Exports since April are now 1.2 million tonnes compared with last year. However, exports have not picked up elsewhere so it does suggest overall trade has slowed. Higher sugar prices, and more importantly, higher freight rates suggests stocks are being drawn down at destination. There has, undoubtably, been some reduction in consumption but not enough to explain the off-take slowdown. Therefore, this might suggest supply will tighten over the coming months.

This morning the market opened 2 points firmer and has remained in a narrow 5 point range so far. Currently, prices are holding a couple of points higher on the day. The VH is 1 point firmer at -58 while the HK is 1 point weaker at +53. In early London trading The VZ is firmer at -20.50 while the ZH is virtually unchanged at -9.30. The macro is, overall, slightly negative this morning with most agricultural markets lower while the USD Index is virtually unchanged. As mentioned above the BRL took a dive yesterday ending at 5.32 after starting at 5.1950 after President Bolsonaro held a rally in Brazilia on the country’s independence day holiday saying he would not obey rulings from the Supreme Court after the court ordered an investigation into the President’s claims that Brazil’s electronic voting system is rife with fraud. He concluded his speech saying ‘Only God will take me out of Brazilia’ with presidential elections due next year. Sugar looks likely to remain rangebound with support being seen at 19.30 the recent low reached on 11^th August. The fund roll continues which is boosting volume with over 80% of yesterday’s total volume spread based.