Sugar Market Report for 3 July

The market made its somewhat inevitable bounce on Friday after dropping 468 point from the highs in less than a fortnight ending up nearly 90 points off the lows. The market had opened 10 points stronger before, immediately climbing another 43 points before some selling was found. Prices dipped slightly remaining range bound until the early afternoon when prices started to improve again hitting the day’s highs late afternoon before some long liquidation appeared taking prices off the highs. Nevertheless, it was a strong close. The NV improved 11 points with the N-23 expiry. The VH gained 5 points to end at -10. In London, the QV was slightly firmer at +5.20 while the VZ ended weaker at +0.90. The WP slipped mainly on the strength of the NY flat price. The VV WP finished at 125.80 and the VZ at 124.90. The improvement in price was based on no significant change in the fundamental picture but after the huge drop the market had become over-sold so a correction was always on the cards – it is just the timing so hard to predict.

The N-23 expiry was a quiet affair. It was a small delivery of around 412,000 tonnes according to estimates with Sucden the main deliverer and Wilmar the main receiver. Official details will be released by the ICE exchange later today. A small delivery indicates a tight physical market which has been the case this year so far so no one will be too surprised.

The COT report, as of the 27th June, as expected, showed the funds/specs had liquidated a large amount of their longs as prices dropped 324 points during the reporting period. Their net long position dropped a massive 66,592 to 141,526. The non-commercials cut their net longs by 45,309 to 112,950. Given the market dropped another 90 points after the report date it is likely the funds are now less than 100k lots net long. The commercials cut their net short position by 60,789 to 302,524 with both gross longs and shorts cutting positions which was a little of a surprise as it was expected end-users would take the opportunity to prices. However, the trade cut the shorts as prices dropped. The Index funds increased their net longs by 5,802 to 160,998.

This morning the market opened 8 points firmer but soon improved further. Currently, prices are back to opening levels after gaining 30 points from its opening levels and pushed above 23 cents momentarily. The VH is up 2 points at -8 and the HK is at +1.25. In early London trading the QV is down $2.40 at +2.80 while the VZ is also slightly weaker at +0.50. The macro is a mixed picture this morning with crude slightly lower while the soya complex is sharply higher following the USDA report on Friday. The USD Index is also firmer while the BRL ended slightly stronger at 4.79 on Friday. The market looks likely to improve further as the correction continues. However, it is a long way back to the highs and with the Brazilian harvest going exceptionally well and the Indian monsoon progressing relatively well there is not too much for the bulls to get excited about at the moment. Traders will be watching the rainfall totals across India over the next few weeks. The monsoon is now across the whole country but June totals were below average and need to increase during July. The funds have covered a large percentage of their longs and may be done for the time being. There is likely to be a residual long which will not liquidate unless there is a significant global event that see other asset classes tumble.

Please note NY market closed tomorrow for Independence Day holiday. London will, therefore, close 1 hour earlier.