Sugar Market Report for 28 July

Good morning,

The markets ended slightly lower yesterday after making a new high for the recent move early in the session. The market had opened 23 points firmer from settlement but slightly lower than the last print. However, once the early market on opening buying subsided prices started to ease lower and were back to unchanged by mid-morning. The market then settled into a narrow 10 point range until early afternoon when prices started to improve again soon reaching the day’s highs. However, this buying soon dried up with prices soon slipping, eventually, ending in the negative column where they remained through to the close. The VH gave back the small gains of the previous session to end 3 points weaker at -42. However, the HK was firmer again gaining another 5 points to settle at +97 as traders see physical tightness early next year. In London the VZ weakened yet again to finish at -15.70 while the ZH was also weaker at -9.40. This meant the WP remained weak with the VV WP valued at 50.20 while the HH WP finished at 66.00. The market remains firm despite the slightly lower close. The Unica data (see below) was in line with expectations and might well have been the case of profit taking after its release.

Unica released their latest harvest data for the first half of July yesterday afternoon. It showed that the crush hit 45.64 million tonnes producing 2.944 million tonnes of sugar from a 47.13/52.87 split. This was in line with earlier expectations. Cumulative crush and production for the season is running at just over 7% lower for both at 256.75 million tonnes and 15.20 million tonnes respectively. However, it should be noted that the agricultural yields was 68.2 tonnes per hectare some 14% down year on year although from a small sample. While there is a long way to go before the end of the harvest, currently, the data points to around 34 million tonnes of sugar production. However, the impact of the recent frosts has not been seen as yet and could have a bearing on the harvest data going forward.

Latest EU beet yields are estimated at an average of around 73.50 tonnes per hectare which is nearly 9% higher than last season. The planted area is thought to be around 1.5% higher than last season. Yields in Belgium, France and Germany are looking to come in higher than last season when dry weather had an impact. Obviously, there is a long time until harvest but the weather continues to be adequate in most major producers.

This morning the market opened 5 points firmer before dropping back after the usual market on opening buying had been completed. Currently, prices are holding around 14 points lower. The VH and HK are unchanged in early trading at -42 and +97 respectively. In early London trading the VZ is valued a tad firmer at -15.40 while the ZH is also valued firmer at -9.10. The macro is mixed this morning with crude slightly higher and grains/soya trending lower. The USD Index is a tad firmer and the BRL ended unchanged at 5.18 last night. Despite prices correcting from the highs it would seem unlikely prices will collapse from current levels with continuing concern over the fate of the Brazilian CS cane crop with further cold weather forecast for Thursday and Friday night although the expected lows have increased by a degree or so over the past couple of days. The spot month discount continues to be seen as negative and is probably deterring the funds from aggressively buying.