Sugar Market Report for 13 July

Good morning,

The market dropped again yesterday mainly on a negative macro picture and despite slightly disappointing Unica data. The market had opened 5-6 points lower before swiftly improving on some early market buying which soon saw the highs of the day in place. However, once this initial buying dried up prices started to slid with, initially, some support found at 18.70. However, by mid-day prices were dropping further as the macro picture deteriorated. The lows of the day were hit just at the Unica report was released. It did add some support to prices and triggered some light short covering but the market slipped back lower as the close approached. The VH finished 1 point weaker at -20 while the HK was unchanged at +72. In London the spot month continued to improve in front of its expiry on Friday as the last of the shorts are squeezed out. The QV increased over $7 to end at a new high of +36.90. The OI dropped by 1,251 lots to 11,560 lots with another 7,401 lots traded yesterday. The VZ also ended firmer at +21.50. This meant the WP improved with VV WP ending at 125.50 while the VZ WP finished at 104.00. The macro came under renewed pressure yesterday as the USD surged again. The USD Index reached its highest level since October 2002 which put all USD denominated commodities under pressure. Concerns over a global recession continue to wash over the markets with investors taking a distinct risk-off attitude. Sugar was no exception as prices fell back after the surge late last week after previously hitting 4 month lows.

Unica released their harvest data for the second half of June yesterday afternoon. It showed 41.88 million tonnes of cane was crushed during the period producing 2.49 million tonnes of sugar from a 45.46/54.54 sugar/ethanol split. The ATR was at 137.08. The crush and sugar production was lower than expectations but the split was better. The ATR was down from same period last year (when it was particularly dry) but saw an improvement from the first half of June (131.04). Ethanol sales remain disappointing. Ethanol sales in June dropped by 4.7% than June last year and 3.3% lower compared with May. Overall the figures are neutral to slightly negative. The split increased again and is likely to increase further during July. However, at the moment,  the best that can be assumed is that total production reaches around the same level as last harvest: 32 million tonnes.

The USDA yesterday increased its estimate for the country’s sugar imports for the 2022/23 season by around 500k short tonnes. They predict a total of 3.5 million short tonnes will be imported. Most of the additional imports will come from Mexico but, probably, not all. Total US sugar production is now seen at 8.94 million short tonnes in 2022/23 vs 9.11 in 2021/22.

This morning the market opened unchanged before improving mainly on the back of a slightly better macro picture. Currently, prices are 10 points higher. The VH is 2 points firmer at -18 while the HK is 1 point firmer at +73. In early London trading the QV is slightly weaker valued at +36.20 while the VZ is a tad firmer at +22.10. As mentioned the macro is a slightly more positive picture this morning with crude firmer as are most grains/soya. The USD index is firmer at 108.15. The BRL ended at 5.438 it’s weakest against the USD since February. The market looks as if it could improve back to above 19 cents but it maybe the case of more consolidation around current levels. The swift recovery from below 18 cents suggests prices will hold above assuming the macro does not take another hammering. The Unica report yesterday will be seen as supportive.