Sugar Market Report for 10 August

The market improved yesterday remaining in the plus column the entire session. The market had opened a surprisingly 20 points higher before immediately plunging 15 points only to recover quickly before then falling back at a gentle pace. The market then trading within a 25 point range through to just before the close when it rallied up to the highs of the day. It was another relatively low volume day (81k lots). The VH improved by 5 points to -20 while the HK was 1 point stronger at +125. In London it was quiet although the structure improved. The VZ ended at +13.80 and the ZH at +12.20. The WP was mixed with the VV WP finishing slightly higher at 164.40 while the VZ was a tad weaker at 149.80. Having dropped 2 cents from the recent highs reached on the 24^th July a correction was not a surprise especially given the underlying fundamental picture which suggests another deficit season in 2023/24. Indeed it was only the negative macro which probably prevented a bounce sooner.

Despite concerns regarding a future deficit in the short term Brazil is producing loads of sugar against limited short term demand. Today Unica will release their harvest for the second half of July (15:00 London time). It is expected to show a excellent crush and sugar production. A S&P Global Commodity Insights survey sees the crush at 51.47 million tonnes for the two week period and sugar production at 3.58 million tonnes. With good weather for harvesting during August so far production should be good for August. This all adds up to the possibility that a record production of over 38.4 million tonnes that was reached in 2020/21 will be seen. Some analysts are now seeing over 39 million tonnes of sugar production given the high sugar mix of 50% or slightly more instead of ethanol. However, El Nino is lurking and could produce early rains which could hamper the end of the crush.

This morning the market opened 19 points higher but immediately fell back. Currently, prices are 12 points firmer. This VH is down 1 points at -21 while the HK is unchanged at +125. In early London trading the VZ is $1 higher at +14.80 while the ZH is slightly higher at +12.70. The macro is a positive picture this morning with most commodities trending higher and the USD Index lower. The BRL ended unchanged at 4.90 last night. The market is caught between the reality of high quantities of sugar being produced in Brazil now and the possibility of a growing deficit for next season depending on weather. Today prices could slip especially if the Unica data is as good as expected. Some traders see prices slipping slightly in the short term with 23 cents a downside target.