Sugar Market Report for 29 August

Yesterday saw another big move higher as concerns over India’s production prospects grow. The market has now gained just shy of 180 points in four sessions. It was a late opening yesterday with the London market closed for the August Bank holiday. The market opened 7 points higher and continued to improve throughout the shortened session with just the occasional drop back on day trader long liquidation. Good fund buying met with limited and scale up selling which allowed the market to settle at its highest level since 21st June. The VH improved 8 points to end at -25 but it was the HK which saw the big gain up 23 points to finish at +145 having gained 45 points in the past four days. Concerns about physical availability in the first quarter 2024 is the main reason for the improvement. Continuing chatter about poor monsoon across India and Thailand is the main driver of the current rally plus a distinct lack of producer selling especially in the spot month.

According to weather department officials, India is likely to see its lowest monsoon rains for eight years with El Nino having an impact on September rains. It is estimated that India could end the monsoon with a rain deficit of at least 8% which would be the worst since 2015. More official data will be announced by the IMD on Thursday 31st August. The uneven rainfall means that some regions will see rainfall deficits well below the average 8%.

The COT report as of the 22nd August showed the funds/specs had cut their net long position by 8,911 to 105,307. The non-commercials cut their net longs by 3,341 to 74,538 during a period that the market fell 88 points so the cut was expected. Needless to say the funds have been actively reinstating longs over the past 3 sessions especially yesterday so are, probably, above 100k lots net long with the ability to buy considerably more if they so desire. The commercials cut their net shorts by 13,166 to 282,834 as end users priced although there was some indication of some producer pricing as well. The Index funds cut their net longs by 4,255 to 177,527.

This morning the market opened 4 points lower but soon improved only to fall back when London did not make its due. Currently, prices are unchanged. The VH and HK are both unchanged at -25 and +145 respectively. In early London trading the VZ id firmer at +4.20 while the ZH is a tad weaker at +8.10. The macro this morning is mixed with crude higher while grains/soya are lower. The USD Index is weaker while the BRL was unchanged at 4.88 yesterday. The market looks particularly strong. Currently, it looks as if any exports from India will be unlikely next season. Coupled with potentially lower production from Thailand it is a heady bullish mix with some arguing that prices could continue to increase substantially from current levels. Brazil will produce as much sugar as possible but that could falter if El Nino rains arrive early.