Sugar Market Report for 22 March

Good morning,

The market improved again yesterday as crude surged over 6% as further bans on Russian crude are discussed. The market had opened 7 points firmer before swiftly jumping another 15 points in relatively thin volume. The market then became range bound for much of the morning but started to improve as US traders got to their desks. A slow but steady improvement was seen over the rest of the session although some heavier selling was found above 19.30. The KN ended unchanged while the NV was 1 point better at -2. In London the structure continued to improve with the KQ jumping $2 to end at +17.70 a new high after hitting +20.00 earlier in the session. The QV also made a new high ending at +13.30 after a improvement to +15.00. This meant the WP also improved with the KK WP hitting 124.30 while the VV WP was also firmer at 95.50. The strength in white sugar has surprised traders with some continuing to find demand limited. The flat price has rallied over 70 points since the recent lows were hit a week ago. The main driver is the strength of crude which has now regained nearly half the corrective drop seen the previous week. Chatter that the EU was mulling the idea of banning Russian crude imports was one factor that saw prices surge again yesterday. The trading volume remains underwhelming suggesting some traders are taking a risk-on attitude.

Brazil government announced yesterday that it will cut to zero import tariffs for ethanol until the end of the year. This is an attempt by the government to help lower fuel prices in the country. The government has been particularly concerned over the increasing cost of gasoline and diesel and the impact on inflation. Whether this move will have any significant impact on prices remains to be seen but it may impact on mills decisions on how much cane they divert to ethanol production when the next harvest starts next month.

This morning the market opened 5 points higher before swiftly dropping into the negative column. Currently, prices are trading around 7 points lower. The KN is 2 points weaker at +10 while the NV is 1 point weaker at -3. In early London trading the KQ is firmer again up at +18.30 while the QV is unchanged at around +13.30. This morning the macro is negative with crude down around 1%. Grains/soya are mixed with wheat firmer. The USD index is firmer while the BRL is continuing to strengthen ending at 4.94 last night its strongest level against the USD since July last year. The market still appears to be beholden to the wider macro picture while being supported by the view that higher crude (and stronger BRL) will see more Brazilian cane being used to produce ethanol as opposed to sugar. The increasing Indian production with most analysts now expecting a total production of 34 million tonnes is bearish with Indian mills looking to sell more sugar if prices improve further. Nevertheless, the strength of white sugar will also be supportive. The market would appear to be caught between 18.50 and 19.50 with the up-side looking more likely to be breached in the short term assuming crude maintains its strength.