Sugar Market Report for 8 August

Yesterday saw a volatile day as prices made a new low for the recent move before rallying to above 24 cents but eventually settled around unchanged. The market had opened unchanged before immediately dropping another 10 points. The market remained under pressure until mid-morning sheading another 17 points before starting to slowly recover. However, it was not until US traders were at their desks that prices improved significantly gaining over 50 points to hit the highs later afternoon. While it was a decent recovery prices failed to break above the previous session’s highs and soon swiftly dropped back over the last 30 minutes of the day as profit taking appeared taking prices back to around unchanged. The VH lost 3 points to end at -22 while the HK was 1 point better at +129. In London, the structure weakened slightly after the gains seen recently. The VZ ended at +9.60 while the ZH finished at +12.00. The WP also took a tumble after hitting highs last week. The VV WP was $4.40 down at 159.50 while the VZ was $3.70 down at 149.90. The movement yesterday, in thin trading volume again (89.5k lots), emphasised the speculative nature of the market at the moment. Talk of another global deficit next season helped prices recover off the lows but there was limited fresh buying.

Sugar consultant CovrigAnalytics reported that they see a production deficit of 2.2 million tonnes for 2023/24 as high Brazilian production not being enough to offset production falls elsewhere. They see production falling in India, Thailand, Pakistan, China, Philippines, Mexico and the EU. Thailand is expected to see the largest fall of 2.52 million tonnes from last season followed by India which see production falling by 1.1 million tonnes. However, they have raised their estimate for Brazil’s CS to 38.7 million tonnes with mills raising their ability to produce sugar which could see the split move to 55% sugar against ethanol production. Czarnikow also see a supply deficit but at 900k tonnes with Thailand’s production falling to 7.4 million tonnes due to hot weather and competition from Cassava. Czarnikow also see consumption reaching a record amount at 179 million tonnes due mainly to population growth. Recently, StoneX estimated a very small surplus for next season of 300k tonnes.

This morning the market opened 4 points lower before slipping further. Currently, prices are 11 points weaker. The VH and HK are both 2 points weaker at -24 and +127 respectively. In early London trading the VZ and ZH are both $0.80 lower at +8.80 and +11.20 respectively. The macro is a negative picture this morning with virtually all commodities trending lower. The USD Index is firmer while the BRL ended unchanged at 4.89. The market could still fall further despite chatter of increasing deficits for next season. The macro will continue to play a part especially as trading volumes remain low. Support should be seen from 23 cents assuming the funds are happy to hold the majority of their longs for the time being.