Market Commentary

08/06/20: Sugar Market Morning Report

Good morning,

The markets were firmer again on Friday as prices settled above 12 cents for the first time since early March when prices were on their way down to below 10 cents. Continuing better macro picture was the main contributing factor for the gains seen during the week. The market had opened 1 point firmer but continued to improve swiftly making new highs of the move and pushing above 11.90. An early test of the 12 cent level soon failed with good trade selling noted. However, as US traders got to their desks another attempt to push higher was more successful although prices did initially fall back only to rebound. Values remained either side of 12 cents for the remained of the session until the close when another wave of fund selling ensured prices settled above 12 cents and just over 110 points higher on the week. The NV remained remarkably unchanged at -7 while the VH finished 3 points firmer at -62. In London the QV slipped $1 to end at +19.90 while the VZ was a little firmer at +9.10. However, the QN WP ended higher again at 128.00 while he VV WP was also stronger at 106.50. The large gains over the week culminating in the market breaking above 12 cents was mainly down to positive macro picture with crude improving just over 10 % on the week while the BRL improved 6.5% on the week and has now improved an impressive 15% from its lows last month.

The COT as of the 2nd June showed that the funds/specs increased their net long position by 3,069 to 8.682. A little more surprisingly was the fact that the non-commercials had only cut their net short position by 4,647 to end short of just 733. It had been assumed by many that they had been slightly more aggressive buyers. However, since the report the funds have been adding to their longs and are now probably around 20-30k net long. As expected producer selling saw the commercials increase their net shorts position by 5,890 to 229,056 but some end user pricing was also noted. The producer selling continued throughout last week as prices improved another cent. The Index funds increased their net longs by 2,821 to 220,375.

More than 70 vessels are awaiting to load sugar outside the Brazilian port of Santos according to Williams shipping agency. It is thought it will take a month to clear although more vessels are arriving daily. This time last year just 15 ships were awaiting to load 700,000 tonnes of sugar. At the moment over 3 million tonnes of sugar is waiting to be exported. The Coronavirus is also compounding the loading issues with many nervous that there could be delays in loading if crew members test positive for the virus and the vessel then needs to be quarantined for 14 days. The likely delays in shipments of raw sugar is one reason for the strength of whites sugar and the ever widening WP. Ironically, there is no obviously shortage of sugar just that it is not where it can be refined and consumed.

This morning the market opened 9 points firmer before slipping back a touch. However, prices are now back to their opening levels. The NV is 3 points better at -4. With the huge congestion at Brazilian ports the front spread may improve further although it is difficult to judge the appetite to take delivery of N-20 at the moment. The VH is a couple of points better at -60. In London the QV is firmer at +21.40 as is the VZ at +10.10 as concerns over tightness of deliverable white sugar increase due, again, to shipment delays out of Brazil and limited alternative sellers. All eyes will remain on Brazil. They are suffering badly with the Coronavirus as are other South American countries. Brazil posted a record number of daily deaths for the virus for the third consecutive day last Thursday although there is some evidence that their hospitalisation rate maybe peaking. Despite these issues the cane harvest continues apace and sugar still remains the more attractive option over ethanol at the moment despite the recent recovery in crude prices. The market looks set to continue to improve although the pace may slow. Nevertheless, some pull back in the macro may well be seen before too long which is likely to impact on sugar prices.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598