Sugar Market Report for 16 September

Good morning,

A tale of two markets yesterday as NY slipped lower while the V-22 expired at a huge $79.80 premium. NY had opened 3 points firmer and then continued to climb as London’s spot month hit new contract highs. The highs of the day were reached mid-morning before turning lower. As US traders got to their desks prices were back to unchanged and then continued to drop during the rest of the session to settle 5 points off the lows. The V-22 option expiry seemed to keep the market range bound despite the strength seen in London. The VH ended unchanged at +30 while the HK was 5 points firmer at +56. In London all eyes remained on the expiring V-22 which hit new contract highs as the last of the caught shorts covered positions. The VZ eventually ended at +79.80 having hit +89.00 earlier in the session. The ZH also ended higher at +34.40 while the HK improved to +15.10. The WP also improved again with the VZ finishing at 142.20 and the HH WP at 114.40. NY doggedly remained range-bound within the 72 point range seen for the past month. With decent rains across Brazil’s CS improving the still to be crushed cane and India expected to soon announce their export policy for the 2022/23 season which is widely expected to start with a 5 million tonne tranche followed later in the year by up to another 5 million tonnes there appears to be no acute tightness that is impacting on the whites market. However, Indian exports are needed which is likely to keep prices firm especially as Indian selling price is above current levels. Additionally, the V-22 remains at a premium to H-23 suggesting limited availability of raws to deliver.

Early indications are that around 224k tonnes of white sugar was delivered against the V-22 contract which expired at a $79.80 premium. It is thought ED&F Man was the sole receiver with Wilmar, Alvean, Al Khaleej and Parry delivering. Full details will be released by the ICE exchange later today. The small delivery and huge premium emphasises the very bullish picture for white sugar at the moment. It would appear this physical tightness is likely to remain the case until well into next year looking at the structure of the market. However, with the WP at excellent levels for refiners it may well be a different story this time next year.

This morning the market opened 3 points firmer but soon fell away after the market on buying finished. Currently, prices are 11-12 points lower. The VH is 1 points stronger at +31 while the HK is 1 point weaker at +55. In early London trading the ZH is weaker at +31.80 while  the HK is unchanged valued at +15.00. The macro continues to emphasis the risk-off attitude by investors with equity markets remaining weak. This morning the markets are mixed with crude firmer while grains/soya mixed and the USD Index a tad firmer. It may well be quiet today post option expiry in NY and V-22 expiry in London. However, there seems little reason for prices to break out of the recent range although the emphasis is, probably, on the down-side. Now the index fund roll is complete the trading volume is likely to drop as the market trades over old ground range-wise. The OI in NY V-22 is well down on previous years with around two weeks until expiry. As of COB 14^th September V-22 OI was 139,538 lots which is considerably lower than at this date over the past 10 years suggesting a small delivery.

Please note London will be closed on Monday 19^th September for the Queen’s Funeral. NY will open later at 12:30 (London time) with normal closing.