Sugar Market Report for 4 March

Good morning,

The market improved again yesterday hitting its highest level since 20^th January on more fund and speculative buying. The market had opened just 1 point higher before settling into a narrow 12 point range until mid-day when a bout of long liquidation was triggered as crude slipped off its highs. The lows of the day were hit mid-afternoon but quickly recovered and continued to improve eventually breaking above the previous day’s highs which triggered more fresh fund buying. The market settled strong forming a double top at 18.98 with the high of 20^th January. The KN improved 5 points to end at +22 while the NV improved to finish at flat it strongest since late January. In London the structure improved again with KQ ending at +13.80 and the QV at +9.30. This meant the Kk WP finished slightly higher at 104.90 while the VV WP was slightly weaker at 86.40. The market remained firm yesterday as the conflict in Ukraine continues to escalate. Crude continues to remain very strong despite prices slipping from the 14 year highs on hopes for a revived deal to restrict Iran’s ability to develop nuclear weapons that might also allow the country to increase crude exports. There appears to be several hurdles to overcome but a deal is expected to be reached. The funds have been buying sugar on the basis that more Brazilian sugar cane will be diverted to ethanol production when the season starts next month.

Brazil exported 1.72 million tonnes of sugar in February compared with 1.82 million tonnes in February 2021 according the data published yesterday. With the official start of the Brazilian CS 2022/23 harvest less than a month away (although it is likely to be a slow start as millers give the cane to recover after months of dry weather last year) it continues to rain across the main sugarcane region for, at least, the next 5 days. Speculation in India that the next monsoon will be normal because there is practically no possibility of El Nino developing to cause dry weather as La Nina also gives way to neutral conditions.

The Thai harvest continues although it has been hampered recently by wet weather. As of the end of February the total cane crushed had reached 74.2 million tonnes (+18.8% year on year) producing a total of just over 8 million tonnes of sugar (+14.8% year on year). Most analysts have cut their total crush expectations from around 100 million tonnes to around 85-90 million tonnes but this could be revised if the weather allows.

This morning the market opened 3 points lower before slipping further. Currently, prices are 7-8 points lower. The KN is 1 point firmer at +22 while the NV is unchanged at flat. In early London trading the KQ is firmer at 14.50 after some early market buying while the QV is around unchanged at +9.30. The macro continues to hold the attention of all. This morning it is still a generally positive picture with crude slightly higher and remaining near 14 year highs. Grains/Soya is mixed although wheat and corn remain very strong due to the likely hood of very limited Ukrainian exports for the time being. The USD index is firmer and at its highest level since early June 2020 as investors continue to seek safe havens. As said yesterday sugar will remain firm or improve further if the funds continue to increase their net long position. There is a double top at 18.98 (triple if one takes into account the high of 19.01 hit in late December). The situation in Ukraine remains worrying and uncertain and things would seem more likely to escalate than calm over the coming days. Above 19 cents the market may run into heavier selling than seen of late but this could quickly be hovered up if the funds maintain their buying appetite.