Sugar Market Report for 1 April

Good morning,

Yesterday saw an inside as the market attempted to consolidate following a couple of volatile days. The market had opened 16 points lower on the back of a lower crude quote after the US government suggested they may use strategic reserves of crude (which was late confirmed by President Biden who said a release of up to 180 million barrels of crude would be seen over the coming six months). Sugar prices quickly dropped further and to the lows of the day before prices slowly recovered managing to get back to just shy of unchanged. During the afternoon prices did push into the plus column as crude recovered slightly before slipping again. However, by the close prices did manage to end with slight gains in the front month although the rest of the board ended in the negative column. The KN improved 6 points to +17 while the NV finished 2 points higher at -2. London saw an unexpected reversal with prices improving against the weakness of the previous day. The spot K22 ended $4.30 firmer with the KQ ending nearly $2 firmer at +10.80 while the QV was marginally higher at +7.80. However, the flat price strength compared with NY meant the WP improved with KK WP ending at 111.80 and the VV WP at 96.50 although it was a quiet day with no block trades in the WP. Despite the weakness of crude, which ended over $30 per barrel off the highs seen back at the beginning of March, sugar held well as the BRL remained firm and traders continued to agonise over the sugar/ethanol split for the next harvest.

With the Indian and Thai 2021/22 cane harvest coming to an end all eyes are turning to Brazil. Today marks the start of the 2022/23 CS crush. It is likely to be a slow start as mills leave the cane as long as possible before starting operations allowing it to continue to recover from the months of severe drought. Additionally, it continues to rain over the region which is good news for the cane but will further delay the start of the crush. Therefore, it is likely it will be several weeks before any cane production estimates will be forthcoming along with any sugar/ethanol split trends. Add in the likely volatility of crude and the BRL it is likely to be a rollercoaster of opinions over the next few months.

This morning the market opened 7 points weaker before swiftly improving back to unchanged. However, more selling appeared taking prices lower. Currently, prices are holding around 11 points weaker. The KN is 2 points stronger at +19 while the NV is 1 point weaker at -3. In early London trading the KQ is weaker at +9.20 while the QV is around unchanged at +7.80. This morning the macro is negative with crude nearly 2% lower and grains/soya weaker apart from wheat which is unchanged. The USD Index is firmer although the BRL ended slightly stronger at 5.74 last night. Sugar does seem to be less tied to crude at the moment. Sugar prices are not too dis-similar to where they were this time last week while crude is some $12 lower. However, whether the market can remain near the top-end of its recent range remains to be seen as the drop in crude may, eventually, weigh on prices. Nevertheless, support should be seen at 19 cents and a push through the high at above 19.60 could trigger fund buying which could quickly see prices challenging the high of March.