Sugar Market Report for 2 August

The market dropped on Friday as the cold weather across Brazil was less severe than had been feared and chatter India had sold raw sugar after prices pushed above 19 cents (basis H-22) earlier in the week. The market had opened unchanged before improving 15 points to hit the days highs shortly after the opening. With no further follow-through buying appearing prices started to ease back and were soon in the negative column. Prices eventually found some support just above 18 cents which saw the market settle into a 19 point range for all but the last 90 minutes of the session when further liquidation was seen which took prices down through 18 cents which triggered some light sell stops which took prices down to the lows of the day. Late day trader short covering saw the market pull off the lows on the close but it was, nevertheless, a disappointing performance. The VH slipped 2 points to end at -52 while the HK dropped 8 points, mainly on the flat price weakness, to end at +96. In London the VZ weakened yet again to end at -19.60 while the ZH was slightly firmer at -9.40. This meant the VV WP remained weak at 51.00 while the HH WP improved slightly to end the week at 68.00. The market was unable to build on the new five-month highs seen earlier in the week which prompted a bout of long liquidation. The lack of trading volume on the way up probably exasperated the fall with volume still poor at just over 13,600 lots. The news that the temperatures across Brazil’s CS were not as low as had been feared saw coffee fall over 8% which probably also had a impact on the sugar market.

The COT as of the 27^th July saw the funds/specs increase their net long position by 27,784 to 225,622. The non-commercials increased their net longs by 18,754 to 169,913. This was, probably, in line with expectations after the market had improved just over 130 points during the reporting period. The commercials increased their net short positions by 34,643 to 442,846 with good trade and producer selling with only minimal end-user pricing. The large increase of the gross shorts (+39,283) suggested the Indian sales which were reported earlier last week. The Index funds increased their net longs by 6,859 to 217,145.

The Indian Meteorological Department reported today that they see average amount of rainfall during the next two months of the monsoon. So far the monsoon has been reasonable after a good start. The rains became more sporadic during June but picked up again during July. If the total rainfall does end at average or better it will be an unprecedented third monsoon in a row which bodes well for the 2022/23 Indian cane crop.

This morning the market opened 5 points lower before swiftly improving back to unchanged before improving further. Currently, prices are around 5-6 points firmer. The VH is 1 points lower at -53 while the HK is 1 point firmer at +97. In early London trading the VZ is a tad former at -18.70 as is the ZH at -9.10. This morning the macro is slightly negative with crude a tad lower while grains/soya are lower apart from wheat. The USD Index is weaker this morning as it continues to slip away from its highest level since early April last week. It would seem unlikely the market will collapse from current levels as fundamentals have not changed dramatically recently. There are still the concerns over the state of the Brazilian CS crop as the dry weather impacts with analysts still likely to lower final expectations especially as the frost damage continues to be assessed. The flip side is that there still appears to be limited physical demand as spot months continue to remain weak. Seasonality charts would suggest prices might improve over the next couple of months another reason to suggest prices will not collapse.