Sugar Market Report for 8 April

Good morning,

The Market rallied to its highest level since 24^th November (1^st month cont.) yesterday mainly on concerns over a late start to the Brazilian CS crush and predicted increasing Indian consumption before falling back to settle around the middle of the day’s range. The market had opened 1 point firmer before improving another 15 points over the next 20 minutes. Prices slipped back to unchanged where good support was found with prices soon pushing higher. However, it was not until early afternoon when some aggressive buying appeared which, swiftly, saw prices breach the highs seen a month earlier which triggered a combination of buy-stops and further short covering which took prices through the 20 cent level. However, the buying quickly dried up with prices soon falling back below 20 cents. The market remained volatile for the rest of the session by eventually settled 25 points firmer on the day. The fund roll out of the spot month has started in earnest with around ¾ of the volume spread based. The KN ended 1 point weaker at +14 while the NV was a couple of points firmer at -4. In London the KQ slipped again to end at +9.30. The OI in K-22 dropped a minimal 599 lots to 17,724 lots with another 5,848 lots traded yesterday. The QV also slipped slightly to end at +6.90. This meant the WP dropped slightly with the Kk WP ending at 111.30 and the VV WP at 97.30. The market had been threatening to test the highs of March for some time with a test of the 20 cent level to see whether any significant buy-stops were triggered. In the event prices quickly fell back but remained within striking distance of another attempt.

It is difficult to pin-point the reason for the rally above 20 cents. At the time crude was around unchanged and the BRL was at its lowest level in a week against the USD. Talk that Brazilian Mills are waiting to start the harvest because of low potential yields was cited although it should have little impact against the spot month. More poignant was, perhaps, the view of ISMA that Indian sugar consumption may hit record highs this year as the country opens up after Covid. ISMA reported they see total consumption at 27.2 million tonnes for the current season. With record exports as well season ending stocks could be around 6 million tonnes the lowest in five years. However, it is likely that total sugar production for the current season will be a record with some expecting the total to reach 35 million tonnes nearly 8 million tonnes above domestic consumption. Assuming an average monsoon and another 33-34 million tonnes could be produced next season allowing sizable exports next season.

The Thai cane harvest continues to see a long tail. As of the 6^th April a total of 91.425 million tonnes of cane has been crushed producing a total of 10.054 million tonnes of sugar. The remaining operating mills will close over the next couple of weeks. Good recent rainfall bodes well for the next harvest and some analysts are pencilling in sugar production of 12-13 million tonnes although there is a long time to go.

This morning the market opened 9 points firmer but soon dropped back to unchanged where prices are, currently, holding. The KN is unchanged at +14 while the NV is 2 points firmer at -2. In early London trading the KQ opens unchanged while the QV is a tad weaker at +6.40. This morning the macro picture is mixed with crude slightly firmer but down on the week. Grains/soya contracts are all around unchanged while the USD Index is higher and at a new two year high and just below 100.00. The BRL dropped back again yesterday to end at 4.75 against the USD. Market direction is difficult to predict. One could argue that another attempt to push and close above 20 cents could be seen which would make the chart look technically positive. On the other hand there would seem no compelling fundamental reason for prices to be above 20 cents so a downward correction could be triggered if the macro weakens.