Sugar Market Report for 9 August

New 5 ½ month highs were reached on Friday as the market continues to rally on diminishing prospects for Brazil’s CS cane crop. However, prices ended in the bottom end of the day’s range and the volume continued to remain disappointing failing to reach 100k lots. The market had opened 6 points weaker before swiftly dropping another 5 points to the day’s lows only to then jump 11 points all in the first 5 minutes of trading. The market soon settled into a narrow 7 point range until US traders started to get the their desks when a fresh bout of buying appeared to push prices through the previous day’s highs and then up to their highest level since late February. Resistance was found above 18.90 which soon triggered a bout of long liquidation which saw prices gradually slip lower over the rest of the session to settle 24 points off the highs but still marginally higher on the day. The VH improved 1 points to end at -55 while the HK was a couple of points firmer at +92 having hit +100 earlier in the session. In London the VZ slipped to close at -18.10 while the ZH ended virtually unchanged at -6.20. However, the WP took another knock with the VV WP ending at its weakest level for some time at 47.80. The HH WP was also slightly weaker at 60.00. Following the very strong performance the previous session it will have surprised few that prices improved further on Friday. Nevertheless, the weakness of the spot months continues to weigh on the markets.

The COT as of the 3^rd August reminded traders that it was a volatile week when prices rallied to 18.81 only to drop over 100 points to end over 60 points down from the beginning of the reporting period. The funds/specs increased their net longs by 1,254 to 226,956. The non-commercials increased their net longs by 7,467 to 177,380 which was probably in line with expectations. The commercials saw trade on both sides with the net short position increasing by just 425 to 443,271. The Index funds cut their net longs by 830 to 216,314. Since the report the market has rallied over 90 points with the funds, undoubtable, increasing their net longs. Currently, they are probably around 190-200k net long.

A report by the new European sugar consultancy CovrigAnalysts released Friday said prices could reach 21 cents due to the continuing problems with the Brazilian CS crop. They said that if the CS production drops to a worst case scenario of around 30.8 million tonnes then it would point to a sizable global deficit for 2021/22 of around 4.6 million tonnes.

The latest Russian sugar beet test showed the average root weight was 303 grams and sugar content at 15.38% the Russian Sugar Producer’s Union reported Friday.

This morning the market opened 9 points lower mainly on a weak crude market which has dropped nearly 10% over the past week. Prices immediately dropped another 23 points on speculative selling. However, prices soon recovered back to opening levels all in the space of 3 minutes and are, currently, around unchanged. In early trading the VH is unchanged at -55 while the HK is 1 point weaker at +91. In early London trading the VZ and ZH are unchanged at -18.10 and -6.20. The macro is mixed this morning with, as mentioned above, crude over 2.5% lower while the rest of the markets are mixed with the USD Index virtually unchanged. Despite the macro it would seem likely that prices will improve again and could challenge the highs seen on Friday. The growing view is that the Brazilian CS crop will be continue to be marked down thereby increasing the likelihood of a sizable global production deficit for next season. Counter to this is the fact that nearby demand remains poor and Indian stocks will likely plug short term supply shortages.