Sugar Market Report for 10 May

Yesterday saw a commodity wide sell-off which resulted in sugar wiping out all the gains of Friday as prices fell back to recent lows. The market had opened 16 points weaker on the back of a negative macro picture and very strong USD. The market, initially, saw some support at 18.90 but by late morning prices broke lower and continued to drop hit the lows late afternoon when support was found just below 18.60 as was the case for all of last week. The market pulled off the lows as the close approached on speculative short covering and end-user pricing. Nevertheless, it was a poor performance especially after the positive performance seen on Friday. The trading volume was also very poor considering the move at just over 97k lots. The NV slipped 4 points to end at -14 while the VH was also 4 points weaker finishing at -29. In London it was quiet again as the QV improved $1 to end at +10.10 while the VZ was a tad firmer at +3.20. The WP was barely changed with VV WP finishing at 96.80 and VZ WP at 93.60. A distinct risk off attitude enveloped the markets yesterday with all commodity and equity markets lower while the USD surged as concerns over the global economy slipping into recession due to the pandemic and the continuing lock-down in China and the Russian/Ukraine war plus the surging inflation which is seeing major economies raising interest rates strongly and swiftly. Sugar, unsurprisingly, was caught up in the turmoil and with little support dived back to its support levels of last week.

Unica will release their CS harvest data for the 2^nd half of April today at 15:00 (London time). The information is eagerly awaited after a very slow start to the season. While the slow start was anticipated as mills wait as long as possible before crushing to allow the cane to recover from the months of dry weather last year the sugar/ethanol split is the key figure. It is likely the amount of cane crush will be well above the 5.19 million tonnes crush in the first half of April it is likely to be well below the 29.5 million tonnes crushed this time last year. The split last year was 44.4/55.6 which is not expected to be seen so far. It is still too early to make any serious assumption about total sugar production but it probably will not stop some from predicting.

The French farm ministry reported this morning that they expected the sugar beet planted area to reach 399,000 hectares this season compared with 403,000 hectares in 2021. This drop in planted area is expected with other crop offering a better return.

This morning the market opened 1 point lower before improving. Currently, prices are around 8 points firmer. The NV and VH are both 1 point firmer at -15 and -28 respectively. In early London trading the QV is a tad weaker at +9.90 while the VZ is unchanged at +3.20. The macro is more positive this morning although crude is slightly weaker. However, grains/soya are firmer while the USD index is slightly firmer but well off the highs seen this time yesterday when it had hit its highest level since February 2003. The BRL ended at 5.16 it weakest level against the USD since early March and well below the recent high of 4.59. Assuming there is not another deterioration in the macro sugar looks likely to hold the lows of last week with good support still seen at 18.50 and below. The release of the Unica data may have some impact but after yesterday’s sell-off it will be a tall ask for prices to improve significantly.