Sugar Market Report for 21 June

The market dropped yesterday but it was the weakening of the structure that was the stand-out feature. The market had opened, unexpectedly, 18 points weaker before, immediately, dropping another 45 points in the first five minutes of the session to hit the day’s lows. Prices soon started to improve but it took until US traders were at their desks to get back to opening levels. The market did improve enough to push into the plus column but it was a fleeting visit with prices soon dropping back only to quickly recover. Eventually, the market ended in the top end of the day’s range but some 16 points off the highs. As mentioned the structure took a battering with the NV dropping to its lowest level since the beginning of March and ending weak at +19 down 15 points from Friday’s close. The VH was a little more subdued remaining within the month’s range but still dropping 8 points to end at +18. In London, it was a similar picture with the QV slipping back towards the lows of last week finishing at +0.20. The VZ was also weaker ending at +2.20. However, the WP improved with the VV WP ending at 127.10 and the VZ WP at 124.90. There seemed little reason for the early weakness. Some pointed to news that the Indian monsoon was about to move further across the country after stalling for several days. Others said it was just a bout of long liquidation after the run up of over 140 points seen over the previous week. However, the weakening of the front spread points to some trade longs rolling forward and not take delivery. Despite the front spread weakness the flat prices still ended just over 60 points off the contract highs.

As mentioned above the Indian monsoon is likely to gain momentum over the next few days after stalling recently due to a severe cyclone in the Arabian Sea. Currently, the monsoon rains have reached just one-third of the country but should now progress to central and western states. Rainfall in June has been 33% below normal levels (and considerably less in some regions) but Indian forecasters are saying the rains should be good this week.

Brazil’s Copersucar who own Alvean reported 29% of global sugar sales during the current 2022/23 season according to their CEO Tomas Caetano Manzano. He went on to comment on the global market and said they expect a global production deficit in 2023/24 possibly larger than this season. This is against most analysts who see a small surplus for next season. Manzano also says they see a trend for weaker sugar production in India and Thailand due to the impact of El Nino.

This morning the market opened 8 points higher but immediately slipped back. Currently, prices are 5 points higher. The NV and VH are both 2 points firmer this morning at +21 and +20 respectively. In early London trading the QV and VZ are unchanged at +0.20 and +2.20 respectively. This morning the macro is mixed with crude slightly higher but majority of commodities trending lower while the USD Index is slightly firmer. The BRL ended a tad weaker yesterday at 4.79. The market appears to be unsure of direction at the moment. Nothing fundamental has changed. The Brazilian CS harvest is progressing well but there are some concerns that the arrival of El Nino could impact on the tail of the harvest and also the loading and shipments. The Indian monsoon needs to make good progress across the country and while it remains behind schedule doubts will remain about total rainfall. The market looks more likely to slip lower again especially if the structure continues to weaken but any wholesale sell-off would seem unlikely.