Sugar Market Report for 22 September

Good morning,

The markets ended higher yesterday as the macro picture improved after the hard sell-off on Monday. The market opened 3-4 points firmer before quickly climbing higher to hit the highs of the day some 90 minutes after the opening. However, resistance was seen in front of the 20 cent level which triggered long liquidation with prices dropping just over 40 points to hit the lows of the day mid-afternoon. The selling eventually dried up as the lows of the previous session were reached. Prices did dipped into the negative column momentarily but prices soon recovered allowing the market to settle around the middle of the day’s range. The VH dipped back to end 5 points lower at -78 while the HK also slipped 3 points to finish at +51. The trading volume dropped again failing to reach 95k lots. In London it was an equally quiet session with the ZH and HK ending virtually unchanged at -4.00 and +4.10 respectively. The WP eased a little lower with HH WP finishing at 69.80 and the KK WP at 76.90. It probably was not a great surprise the market managed to bounce off the lows of Monday as the macro turned positive after the negativity of the previous sessions on concerns over the Chinese economy due to the financial woes of Evergrande and concerns of US Fed decisions for the US economy over the coming months. However, the recovery was limited with prices still over 60 points below the highs of last week.

There is not a huge amount of fresh fundamental news around hence the markets adhesion to the macro at the moment. The woes of Brazil are well documented and in the market. Better rains across India and Thailand have boosted cane prospects for the soon to start 2021/22 harvest. Demand still seems limited especially n ear-by with the raw spot month dropping to a deeper discount yesterday. Currently, the OI in V-21 stands at 107,802 lots and is probably now below 100k lots after another 26k lots traded yesterday. With another 7 sessions before expiry it looks as if the delivery will be limited but unlikely to be small but much will depend on the VH movement over the next week.

This morning the market opened 7 points firmer before improving further on early market buying probably on back of positive macro. Currently, prices are holding 11-12 points firmer. The HK is unchanged at -78 while the HK is 1 point firmer at +52. In early London trading the ZH is a tad weaker at -4.20 while the HK is unchanged at +4.10. The macro is positive again this morning as markets continue to recover from the sell-off on Monday. Virtually all commodity market are trading higher while the USD Index is unchanged at 93.20. The markets look set to continue to consolidate with support seen at 19.50 and resistance at 20.50 basis H-22. Further downside losses might be seen if the funds decide to liquidate more but are side-lined at the moment. Much will depend on the macro. The weakness of the spot month is weighing on the market. Perhaps once the V-21 expiries there will be more scope on the up-side with 6 months until the next expiry.