Sugar Market Report for 7 March

Good morning,

The market, propelled by higher commodities prices across the board, hit its highest level since early December on Friday as the Russian/Ukraine conflict continues to dominate global headlines. The market had opened 3-5 points lower before dropping another 9 points on some early market selling. However, this soon turned out to be the low of the day as prices started to improve soon pushing back to unchanged. The market then remained within a narrow 10 point range until US traders got to their desks when prices started to improve again as more fund buying appeared. The market saw a steady increase over the next couple of hours before, eventually, running into some selling just shy of 19.50 putting in a triple top at 19.47/48 (basis K-22). This triggered a bout of late profit taking but the market, ultimately, ended firm and highest settlement since 8^th December. Unsurprisingly, the KN improved 5 points to end at +26 while the NV was just 1 point firmer at +1. In London the KQ ended slightly firmer at +13.20 while the QV was $3 firmer at +10.90. This meant the KK WP was a little firmer at 105.70 as was the VV WP at 87.60. All eyes remain on the situation in Ukraine which remains worrying and very uncertain and continues to spook the market especially crude, wheat and corn which are at multiyear highs. Sugar has move higher in anticipation that Brazil will divert more cane to the production of ethanol, thereby lowering the total sugar produced which is already compromised by the dry weather last year which hit the crop hard.

The COT as of the 1^st March showed the funds/specs had cut their net long position by 6.704 to 56,992 during a period when prices pulled off the two month lows. The non-commercials increased their net long position by 5,869 to 35,594 as gross shorts covered. Since the report date prices have rallied another 100 points mainly on fund buying. Currently they are likely to be 50-60 k lots net long as more gross shorts are covered. The commercials increased their net short position by 9,232 to 253,050 as both gross long and shorts cut positions. This was probably mainly due to the H-22 expiry and also general risk aversion due to Ukraine. The Index funds increased their net long position by 2,529 to 196,059.

World food prices hit a record high in February led by Daily and Vegetable oils. The FAO price index hit 140.7 last month. Since the end of last month food prices have rocketed higher due to Ukraine and look certain to increase further over the coming months increasing concerns over further food inflation.

The Brazilian consultancy, Datagro, reported on Friday that they see Brazil’s CS to produce 562 million tonnes of sugarcane in 2022/23 as the crop recovers from the extreme dry weather of last year. However, they caution that rainfall across some regions has not been great recently and will need to improve for the cane crop to push above 560 million tonnes.

This morning the market gapped higher opening 23 points higher on the back of much higher crude prices after the US suggested they may ban Russian crude. Good market on opening buying then saw prices improve another 23 points hitting its highest level since mid-November. Chart gap between 19.48 and 19.54 basis K-22. Currently, the market is 48 points firmer. The KN is 7 points firmer at +33 while the NV is 4 firmer at +5. In early London trading the KQ is firmer again at +14.70 while the QV is also firmer at 11.80. All commodities higher this morning with crude leading the way having shot up to their highest level since 2008. Other commodities higher with wheat 7% higher. It would seem sugar prices will continue to improve with little indication that any markets will drop back in the short term. Analysts are expecting Petrobras to soon have to increase gasoline prices in Brazil although other believe they may hold off until prices reach $130/140. The market will be dominated by what is happening elsewhere and is likely to remain very volatile while the global situation remains very uncertain.