Sugar Market Report for 5 June

The market fell again on Friday settling at its lowest level since 21st April as supply concerns ease slightly. The market had opened unchanged but immediately came under pressure as more long liquidation was noted. By mid-morning prices were down nearly 30 points. The market then became stuck within a relatively narrow 20 point range for the remainder of the day only dipping a little more mid-afternoon to register the lows of the day before prices lifted on the close with some day-trader short covering. The NV lost 5 points to settle at +22 while the VH was 3 points weaker at +18. The weakening of the structure does point to a view that physical tightness may be easing slightly. In London the QV dropped to +7.60 its weakest level since October last year while the VZ was also slightly weaker at +11.40. However, the WP was barely changed with the VV WP ending at 138.20 and the VZ at 126.80. The flat price has been under pressure for the past week but the weakening of the structure will be more of a concern for the bulls as it possibly points to a change in attitude regarding physical supply. It has dried up across Brazil’s CS which will allow field operations to continue after a couple of days of rain. There have also been some early monsoon rains in India and Thailand which has led some to believe the monsoons will not be impacted by El Nino although it is very early days and much can happen over the coming weeks.

The COT report as of the 30th May showed that the funds/specs cut their net long position by 28,696 to 189,286. This cut was expected with prices dropping some 80 points during the reporting period. The non-commercials cut their net longs by 21,963 to 147,153. With further liquidation seen over the past three sessions it is now likely the funds are around 110k lots net long and getting close to their core longs who may not liquidate at the moment. The commercials cut their net longs by 34,004 to 327,877 as trade cut shorts although there was precious little evidence of any significant end- user pricing. The Index funds cut their net longs by 5,308 to 138,591.

Brazil exported 2.47 million tonnes of sugar in May 2023 compared to just 1.57 million tonnes in May 2022. This improvement was rather higher than expected and suggests that fresh Brazilian raw sugar will start to replenish stocks at destination.

This morning the market opened 12 points firmer mainly on the back of an improved macro picture as most energy products higher on talk that OPEC will cut production to try to improve crude prices. Currently, the market is 24 points firmer. The NV is 2 points firmer at +24 while the VH is 3 points firmer at +21. In early London trading the QV is $0.70 firmer at +8.30 and the VZ is also slightly firmer at +11.70. As mentioned energy is higher today although other commodities are mixed. The USD Index is stronger while the BRL ended lower at 4.96 on Friday. The market looks as if it will remain beholden to the macro while uncertainty continues to remain on the fundamental side. The funds have liquidated some of their longs but do not seem to be in any hurry to sell more. However, there would also appear limited reasons for prices to rally significantly from current levels and may start to try some consolidation at around 25 cents.