Sugar Market Report for 8 February

Good morning,

The market dropped back yesterday retracing virtually the exact same range as seen on Friday. The market had opened 7 points lower but soon pushed into the plus column on some early speculative buying. However, selling was soon found at the highs of Friday with prices soon retreating losing over 20 points over the next 90 minutes. Prices then held in a narrow range until US traders got to their desks when prices improved to just shy of unchanged. However, over the last quarter of the session prices eased lower to reach the lows of the day shortly before settlement. Prices did pull off the lows for the close but it was still a weak performance. The HK dropped back after gaining 15 points on Friday giving back 9 points yesterday to end at +35. The KN was also weaker losing 7 point to settle at +13. In London the HK remained firm with 4 sessions until expiry. The OI only dropped a mere 40 lots on Friday to 19,125 lots. Yesterday’s volume in H-22 totalled 8,069 with 2,479 AA’s posted so it is likely the OI will drop more when data released later. The KQ dropped back to end at +5.90. The WP was slightly weaker with HH WP ending at 95.00 and the KK WP at 91.40. it was rather a non-descript session with nearly ¾ of the total volume made up of spreads as traders roll H-22 positions forward. While the market looks well supported there appears little appetite to push prices higher. The funds have cut their net long position to a small 37k lots and are more active elsewhere.

The All India Sugar Trade Association reported yesterday that they believe Indian mills may have signed export contract of up to 4.6 million tonnes in the 2021/22 season which started in October. A total of 3.7 million tonnes have been shipped since October but in the past few weeks mills have struggled owing to scarcity of freight trains. It is still estimated that India could export 6 million tonnes this season down from 7.2 million tonnes in 2020/21.

The analyst, CovrigAnalytics, reported yesterday they see two seasons of small supply surpluses due to higher production in major producers and sluggish demand. They see a small 600k tonne surplus for 2021/22 and another small 900k tonne surplus in 2022/23. For 2022/23 they see Thai production at 10.65 million tonnes and Indian production at around 31 million tonnes. They see total Brazilian CS production rising to 34 million tonnes although this could increase further if the rains continue through into March. However, they do see EU production falling slightly as the beet planted area could be cut.

The Philippines plan to import 200k tonnes of refined sugar to address a supply shortage caused by crop damage caused by the powerful typhoon Rai that hit their plantations in December. The Philippines are not usually an importer but will buy generally Thai sugar when necessary. The country has cut their sugar production estimate by 5% due to the typhoon damage.

This morning the market opened 4 points weaker but soon improved in thin volume. Currently, prices are around unchanged. The HK is 1 point better at +36 while the KN is unchanged. In early London trading the HK is slightly lower at +11.00 while the KQ is a tad firmer at +6.00. This morning the macro is an overall negative picture with most commodities lower and the USD Index firmer. However, the BRL continues to improve against the USD ending at 5.26. The market looks likely to get caught within a range as good support seen below 17.80 but little desire for prices to improve too much. The geopolitical picture remains very uncertain which will keep the macro nervous. This could impact on the sugar market so the downside could be tested if the macro deteriorates further.