Sugar Market Report for 21 July

Good morning,

Yesterday saw an inside day in NY sugar as the market improved after the market dropped the previous session. However, the trading volume was particularly poor not reaching 70k lots. The market had opened 13 points firmer before quickly improving another 20 points. That set the tone for the rest of the session as prices remained top end of the days range but in a narrow 20 point range apart from a short drop back to opening levels mid-afternoon. The market eventually settled in the top end of the range and bang in the middle of the previous day’s range. The VH ended unchanged at -45 while the HK was 4 points better at +81. In London it was an equally quiet session with the VZ ending slightly weaker at -9.80 and the ZH at -7.40. The WP improved slightly with VV WP ending at 65.50 while the HH WP finished at 72.70. It was somewhat inevitable the market would improve after the collapse of the previous session on macro considerations especially as cold weather across south of Brazil may have caused further frost damage to the cane. It is just slightly surprising the volume was even worse than the previous few sessions which was already very lacklustre.

Frost hit cane, corn and coffee crops across Brazil’s south over Tuesday night according to meteorologists. There has certainly been some damage to coffee trees and reports that frost has also impacted on cane in Sao Paulo state. However, it will take some time to assess the extent of the damage especially to the cane much of which is stressed from months of dry weather and cold weather a couple of weeks ago. Further cold weather is forecast for the weekend but is not expected to cause frosts across the cane regions and may, in fact, bring showers to some cane region. Further rains are expected into the start of August. Longer term weather forecasts are suggesting that, by September, a normal rain regime will have returned to Brazil. Forecasts models indicate a normal rain pattern for the second half of September in the CS region. In October a short dry spell maybe seen by a mild La Nina. Time will tell but good rainfall will be needed to get the 2022/23 CS crop a chance to recover from the dry conditions and frosts that have impacted on the cane this season.

The market opened 14 points higher on market on opening buying but immediately reversed direction falling 19 points in less than a minute. Prices are currently holding around 4-5 points lower. The VH and HK are unchanged at -45 and +81 respectively. In early London trading both VZ and ZH are unchanged valued around -9.80 and -7.40 respectively. The macro is a mixed picture this morning with crude a tad lower while grains better while soya lower. The USD Index is firmer and now at its highest level since the beginning of April. The market seems particularly unsure of direction at the moment. Brazil’s CS woes are against a negative macro with a resurgent USD, limited physical demand and, currently, few production concerns with other producers. Nevertheless, with analysts likely to start to mark down Brazilian production further over the coming weeks there would seem little reason for prices to collapse and a push higher would seem more likely.