Sugar Market Report for 14 April

Good morning,

The market continued to consolidate yesterday after an early push to new fresh four month highs rapidly fizzled out. However, the front two spreads weakened with the KN dropping back to its weakest level since mid-March when the flat price was below 19 cents. The market had opened 6-7 points higher before slipping back to unchanged only to improve getting back to the highs of Friday where some resistance was noted. At mid-day a bout of fresh buying took prices to a new high but it was over in less than 5 minutes with prices, subsequently, dropping as speculative profit taking was seen. The market continued to weaken eventually falling into the negative column. However, buying soon appeared taking prices back to unchanged before slipping slightly on the close. The trading volume was huge again as the fund roll continued. As mentioned the KN slipped 7 points to end at +4 although much of the selling of the spread was seen in the last 15 minutes of the session. The NV also ended weaker losing 5 points to settle at -10 and at the bottom end of the range seen since middle of March. In London the KQ improved by over $4 as the last of the shorts rolled positions as the longs look to lock in their purchases. The OI in K-22 dropped to 9,962 lots with another 6,696 lots traded yesterday. It now looks as if the delivery will be around 250-300k tonnes. The KK WP unsurprisingly ended higher at 117.60 while the VV WP finished weaker at 94.10. While prices remained well above 20 cents the bulls may have been disappointed that the market did not rally further given crude jumped over 6% yesterday and the BRL strengthened slightly against the USD both factors which led to prices rallying 100 points last week. It would suggest the funds are not in any hurry to increase their long position. Additionally, there is a growing view that while energy prices are very strong this may not lead to a significant increase in Brazilian cane being used for ethanol production at the expense of sugar.

Unica released their last CS harvest data for the 2021/22 season yesterday. It showed that there had been little activity during the second half of March. Just 1.18 million tonnes of cane was crushed of which virtually all of it used to produce ethanol with just 12k tonnes of sugar produced. Therefore, a total of 523.107 million tonnes of cane were crushed during the season down 13.6% from the previous season. Total sugar production came in at 32.064 million tonnes down 16.64% from the record production the 2020/21 season. The final split was 45.02/54.98 as an average for the season. None of the information was unexpected and had little impact on the market. However, from now on the Unica data will be very much more interesting as it will allow a build-up of expectations for the 2022/23 season.

The French farm ministry reported yesterday that they expect a drop in the planted sugar beet area across the country this year. The ministry see a 1.5% fall in the planted area to 396,000 hectares which is 11.6% below the 5 year average. In Russia the beet planting is going a great pace. Soyuzrossahar estimated that, as of the 11^th April, 195.3k hectares had been sown – nearly twice as great year on year. The total are under beet cultivation is predicted to increase by 6% to 1.07 million hectares.

This morning the market opened unchanged before dropping another 10 points. Currently, prices have recovered to around 3-4 points lower. The KN is 2 points firmer at +6 while the NV is also 1 point firmer at -9. In early London trading the KQ is a tad weaker at +14.40 while the QV is firmer at +7.90. The macro is a negative picture this morning with crude slightly lower after the large gains yesterday. Grains/soya are all slightly lower as are softs. The USD Index continues to improve hitting a new near two year high. The market seems to be at a pivotal level still within striking distance of the recent highs but struggling to maintain the momentum seen last week. Many will argue there is little justification for the recent strength given Indian production and exports are likely to reach record levels this season. However, doubts still remain on how much cane will be available for crushing in the CS and, more importantly, how much sugar will be produced. There are many factors that will determine the sugar/ethanol split which will not become apparent for several weeks yet.