Sugar Market Report for 8 September

The market continued to weaken yesterday hitting its lowest level in two weeks and its lowest settlement since 11th August after the macro turned negative. The market opened slightly higher before swiftly improving another 9 points which quickly turned out to be the high of the day as prices soon dropped back and into the negative column within 15 minutes of the opening. The market continued to fall until finding some support at 19.50 which triggered some light short covering which saw prices improve back to unchanged. However, prices remained under pressure slipping lower again to break below 19.50 mid-afternoon. Again enough buying was found to trigger a bout of short covering which saw prices bounce back to opening levels. However, again more selling took prices back to the lows on the close with the lows of the day hit during the post-settlement period when prices dropped another 5 points. The VH improved slightly in late trading to settle 3 points better at -67 after hitting -77 earlier in the day. The HK slipped 3 points to end at +57 some 40 points weaker compared with the end of July. The fund roll has now started in earnest which boosted the total volume with over 70% spread related. In London the VZ weakened nearly $2 to end at -22.00 with a week to go until the expiry. The OI as of COB Monday was 17,366 lots with another 5,600 lots traded in V-21 yesterday. The ZH improved marginally to -9.30. This put the VV WP at 53.10 and the HH WP at 69.70. it would appear the problems and concerns over Brazil’s sugar production has been priced into the market and the near-by lack of demand is impacting on prices currently. 

An Indian Food minister was quoted as saying India’s sugar production is likely to decline marginally to 30.5 million tonnes next season as more sugarcane is diverted to ethanol production. While the prospects are good for the cane crop with good weather a total of 3.5 million tonnes of sugar production will be used for ethanol. Domestic consumption is seen rising by 300-400k tonnes to between 26.3 and 26.5 million tonnes still slightly lower than pre-pandemic levels. He saw total exports for the season at around 7 million tonnes.

German sugar production is expected to reach 4.38 million tonnes next season up from 4.10 million tonnes from last season on a slightly higher planted area according to the German Sugar Association WVZ in their first harvest forecast. Average beet yield is seen at 77.8 tons per hectare up from 73.3 tons last season. The harvest is expected to begin within a few weeks.

This morning the market opened 2 points firmer before slipping into the negative column. However, this was short lived with prices soon pushing higher. |Currently prices are 6-7 points firmer. The VH is 1 point lower at -68 while the HK is unchanged at +57. In early London trading the VZ is a tad firmer at -21.50 while the ZH is unchanged at -9.40. The macro is mixed this morning after the negativity of yesterday. Crude and grains are a tad higher as is the USD index. Equities are lower. The market remains range-bound (19.30 – 20.37) although now at the bottom end of the range seen since 10th August when prices jumped over 100 points in one session. There would seem little reason for prices to drop through the bottom end of the range for the time being although there does not seem to be the momentum to challenge the highs at the moment. Unica data for the second half of August should be released before the end of the week which may stimulate the market.