Sugar Market Report for 20 January

Good morning,

The market continued to improve yesterday as crude prices surged higher again with prices reaching their highest level this year. The market had opened 8-9 points higher quickly breaching the previous day’s high. The market continued to slowly improve throughout the morning gaining another 20 points by the time US traders got to their desks. A bout of day-trader liquidation saw prices retreat back to their opening levels but decent buying soon emerged which saw prices swiftly improve hitting the highs of the day and their highest level since 30^th December late afternoon. Profit taking pulled prices off the highs by settlement but it was another solid performance with prices having now regained just under 150 points since the lows were hit 10 days ago. The HK improved 5 points to +29 as did the KN which ended at +27. It was a rather different story in London where the structure and the WP took a tumble. The HK ended $3 weaker at +7.00 while the KQ was also weaker at +7.30. The biggest drop was in the WP which saw the HH drop $8 to finish at 89.70 while the KK WP dropped $4 to end at 89.00. There seems no particular reason for the weakness apart from profit taking in a thin market after possibly getting a little over-done on the up-side. In NY the specs/funds have turned buyers encouraged by the strength in crude which hit new highs mainly on the news of an outage on a pipeline from Iraq to Turkey and the continuing Geopolitical tensions.

Several analysts are marking down China’s sugar production for this season due to lower planted area of beet and cold weather caused by La Nina as reported on Monday. Yesterday StoneX increased their expected global deficit by 100k to 1.9 million tonnes from their previous estimate for 2021/22 on the basis that Chinese production will only reach 10 million tonnes. This should mean large imports into China later this year. They kept their view of the Brazilian CS crop for 2022/23 at 565 million tonnes of cane and 34.5 million tonnes of sugar.

This morning the market opened 6 points weaker but immediately improved into the plus column. Currently, prices are 4 points firmer. The HK is 2 points firmer at +31 while the KN is 1 point better at +28. In early London trading the HK is firmer at +7.70 as is the KQ at +7.90. This morning the macro is mixed with crude lower while most other commodities are slightly higher. The USD index is virtually unchanged while the BRL improved yesterday to end at 5.43 its strongest level against the USD since mid -November. The market looks set to remain firm but is likely to run into more solid resistance above 19.30. However, with crude looking unlikely to drop too much from current levels and may well improve further sugar will remain bolstered by the macro so any significant sell-off is unlikely with the chart gap between 18.45 and 18.37 likely to see good support.