Sugar Market Report for 26 January

Good morning,

The market saw an inside day yesterday as the market continued to try to consolidate at between 18.50 and 19.20. The market had opened 4 points firmer before improving another 10 points over the next 30 minutes. However, this proved to be the high of the day as prices soon started to weaken as the macro turned negative with geopolitical concerns continuing. By mid-morning prices were back in the negative column and by the time US traders got to their desks the market was at the lows of the day. However, prices did improve after finding some support at 18.60. The market then remained either side of unchanged through to the close ending slightly lower on the day. The structure was mixed with the HK improving 5 points to end at +37 having been over +40 at one point. However, the KN continued to weaken suggesting the market is seeing relative physical tightness in front of the start of the Brazilian CS harvest but easing once it starts to be shipped. The KN finished down 2 points at +19. In London the HK was unchanged at +7.50 while the KQ was stronger at +6.90. This meant the HH WP ended virtually unchanged at 90.00 while the KK WP was $1 firmer at 90.60. It is a turbulent time across the markets with growing concerns over Russia’s intentions towards Ukraine. This has seen the USD improve which continues to put pressure on many USD denominated commodities. On the other had energy prices remain firm with concerns over supply if things turn worse in Ukraine. Sugar is quieter than other commodities with little fund activity who have other more interesting markets to trade.

As of the 20^th January the Thai harvest continues apace with the crush reaching 36.8 million tonnes which is around 30% higher year on year. Total sugar production has reached 3.7 million tonnes which is just under 30% up on same time last season. Sugar content is still around 1% lower than last season. Most analysts are holding total crush at between 85-93 million tonnes but some are of the view that the top end maybe breached. The rain continues to fall across Brazil’s CS with further rain forecast for the next 10 days. It is likely revised cane estimates for the next harvest which will start in April will appear before too long and are likely to be consolidating at the top end of estimates.

This morning the market opened 3 points weaker before improving back to unchanged. However, selling soon appeared and prices are currently 10 points weaker. The HK is 2 points weaker at +35 while the KN is 1 point lower at +18. The HK is firmer in early London trading at +8.10 while the KQ is weaker at +6.00. The macro is mixed this morning with crude higher while most agri-commodities are trending lower as the USD index is slightly firmer and above 96.00. Geopolitical concerns are likely to continue to dominate the news and markets so it is particularly difficult to predict market direction at the moment. Nevertheless, sugar looks to continue to consolidate with support below 18.50 and selling above 19.30 but with a downside bias.