Sugar Market Report for 12 July

Good morning,

Yesterday saw an inside day as the market attempted to consolidate after a big correction off the 4 month lows hits last week. The market had opened 2-3 points firmer before initially improving to hit the highs of the day. However, once this early market buying dried up prices started to sag and soon slipped into the negative column. The market then settled into a relatively narrow 15 point trading range until mid-afternoon when the market pushed back to opening levels. However, the improvement was short lived with prices easing lower into the close with some late speculative liquidation taking prices down to the day’s low on the close before recovering slightly post-close. The VH eased 7 points to end at -19 while the HK ended 2 points lower at +72. The trading volume eased yesterday reaching just under 90k lots. The OI has dropped to 708,860 lots as of COB 8^th July. This is down more around 20% since the end of last year and 25% lower than this time last year when the OI was at 935,392 lots which does emphasis the risk-off attitude of the investment fraternity. In London the spot month remained strong as expiry looms. The QV was firmer at +29.30. The Q-22 OI dropped to 12,811 lots with another 4,202 lots traded yesterday. The VZ finished slightly lower +19.40. This meant the WP eased slightly with VV WP ending at 122.00 and the VZ at 102.60. It was probably somewhat inevitable the market would ease slightly after gaining over 115 points in just two sessions late last week. The macro did not help with the USD index hitting another 20 year high which saw the BRL drop to 5.37 and crude weaker.

Unica will release their 2^nd half June harvest data at 15:00 today (London time). It had been dry during the period with virtually no time lost to rain. Expectations are for 44 million tonne crush producing 2.5 million tonnes of sugar from a 43/57% sugar/ethanol split. Traders will be watching the ATR which should also see an improvement due to the dry weather with expectations it should reach 142 kg. Last year a total of 45.4 million tonnes of cane were crushed producing 2.9 million tonnes of sugar with a sugar mix of 46% and an ATR of 146 kg. First half of June figures were better than expectations so perhaps analysts have adjusted their expectations. Any large deviation from expectations is likely to impact on prices.

This morning the market opened 6 points lower mainly on a negative macro picture. However, currently, the market has improved back to unchanged. The VH and HK are unchanged at -19 and +72 respectively. In early London trading the QV and VZ are virtually unchanged at +29.30 and +19.30 respectably. As mentioned the macro is a negative picture this morning with most commodities trending lower mainly on the surging USD. The USD Index has made a new high pushing over 108.20 its highest level since October 2002. Currently, sugar is maintaining the gains of last week despite the surging USD. Traders await Unica which may set sentiment in the near term.