Sugar Market Report for 25 July

The market made a new high for the recent move but ended lower on some light long liquidation. The market had opened unchanged and held around the level for the next couple of hours before a bout of buying had prices improving again soon pushing above the previous day’s high and hitting the day’s high as US traders got to their desks. As the buying became thinner prices started to decline losing 45 points over the next 90 minutes to register the day’s lows. Eventually, day-trader short covering appeared which lifted prices although they declined on the close again to end slightly lower. The VH lost 5 points to finish at -13 as did the HK which ended at +145. In London it was a similar picture with the structure weakening slightly as the VZ ended at +8.10 and the ZH at +11.20. However, the WP was unchanged on the day with VV WP at 150.00 and the VZ WP at 141.80. Despite the continuing overall strength of the market, it was another relatively quiet day. The market has improved by just over 3 cents since hitting the lows at the end of June so some stall in the rally is to be expected. The funds have been reinstating longs sold during the collapse in prices in June although at a measured pace given the low trading volumes seen recently. The producers have been largely absent recently certainty in near month although there has been some for next year but, again, at a more measured pace than when prices spiked during March/April.

Unsurprisingly, the European Union’s crop monitoring service (MARS) reduced all of its crop yield forecasts in the latest report including due to the severe heat and dry weather recently. They have reduced their beet estimate to 73.3 tonnes per hectare versus 75.9 tonnes per hectare last month. However, it is likely that there are considerable differences between countries. Northern Europe has not seen the heat of the Mediterranean and the likes of Belgium and Netherlands have seen good rains which also goes for the UK. However, further East it has been drier.

This morning the market opened 4 points lower and immediately dropped another 16 points before recovering back to opening levels all in the space of less than one minute before slipping again. Currently, prices are 21 points weaker. The VH is 1 point weaker at -14 while the HK is 3 points lower at +142. In early London trading, the VZ is a tad higher at +8.20 while the ZH is slightly weaker at +10.90. The macro is mixed this morning with crude a tad higher while grains/soya are weaker. The USD Index is slightly weaker while the BRL was stronger last night ending at 4.73. The market may see a correction after the 3 cent rally since the beginning of the month but it would seem unlikely any significant collapse will be seen with some much uncertainty over production prospects for the largest exporters. Unica should release their first half July data sometime this week which should show high crush and production which may be weighing on the market.