Sugar Market Report for 12 April

12 April 2022

Sugar Market Morning Comment

Good morning,

The market consolidated yesterday after the big gains on Friday which saw prices rally to their highest level since November last year after crude fell again. The market opened 8 points lows but soon dropped another 27 points over the next 30 minutes to hit the low of the day as weak longs liquidated as crude dropped to its lowest level since the middle of March. Prices then recovered some of the losses but soon dropped back to the lows where support was found as prices approached 20 cents. As US traders got to their desks prices jumped 20 points on some fund buying. Prices improved a little more as crude pulled off its lows but the market never managed to get back in the plus column. Nevertheless, prices improved back to the highs by the close to settle with only marginal losses on the day and poised to test Friday’s highs again. The KN dropped 3 points to settle at +11 while the NV saw a more dramatic drop of 9 points back a discount of -5 as profits were taken after the big jump on Friday. In London the KQ improved to +1040 while the QV was unchanged at +6.70. This meant the KK WP was stronger at 11.50 while the VV WP was weaker at 95.90. It was not too surprising that the market faltered yesterday after the 100 points gains of the previous week especially given the weakness seen in crude and most other commodity markets. However, the market held the majority of gains as the BRL remained firm against the USD.

The Indian Government’s Food secretary, Sudhanshu Pandey, said yesterday that he sees record sugar exports at around 8.2 million tonnes from total production of 35 million tonnes during the current 2021/22 season with mills already contracted to export around 7 million tonnes. Therefore, stocks should be around 7 million tonnes by the end of the season. He puts domestic sugar demand at between 26-26.5 million tonnes below ISMA’s estimate of 27.2 million tonnes.

Broker Stone X have lowered their Indian production forecast to 33.2 million tonnes which means they now see a global deficit of 1.1 million tonnes for 2021/22down from their last estimate of 1.9 million tonnes. Given Indian production is now widely predicted to reach 35 million tonnes this suggests a small global surplus. They keep their 2022/23 Brazilian estimate unchanged at 565 million tonnes and 34.5 million tonnes of sugar. They do not see a major shift in the split of cane to ethanol noting that mills have hedged about 76% of expected sugar production.

UNICA will release their harvest data for the second half March this afternoon at 15:00 (London time). It not expected to show any major crush or production which will be probably all ethanol. However, it will give a season total for the crush and production.

This morning the market opened 8 points firmer before slipping back to unchanged. However, good buying was found at this level and this triggered fresh buying. Currently prices are around 7 points firmer. The KN is unchanged at +11 while the NV is a couple of points firmer at -3. In early London trading both the KQ and QV are unchanged at +10.40 and +6.60 respectively. With three trading sessions to go the OI in K-22 London fell to 12,132 lots as of cob Friday with another 6,143 lots traded yesterday so the total delivery might end at around 300k tonnes with Indian sugar in the tape. The macro is a positive picture this morning with crude 2.5% higher and grains/soya firmer. However, the USD Index is firmer and above 100.00 hitting its highest level since May 2020. However, the BRL remains firm and ended at 4.6950 last night. With crude and BRL firmer it may encourage more fund buying which will see prices improve further. However, from a purely fundamental perspective there would seem little reason for prices to improve with a small global production surplus for the current and next season seemingly likely.