Sugar Market Report for 5 October

Good morning,

The market saw a large turnaround yesterday regaining the losses of the previous session and more to end at its highest level since 22^nd September. The market had opened 10 points firmer but soon slipped lower but good support at just above 17.40 stopped any further erosion in prices. The market started to improve as US traders got to their desks and it was one way traffic for the rest of the session as prices gained over 50 points before, eventually, selling and resistance was found at 18.00 cents. Unable to break higher day-trader liquidation and more general trade selling saw prices fall away slightly on the close but it was still a strong performance. The HK improved by 10 points to end at +77 while the KN was 11 points firmer at +39. Nevertheless, the trading volume was limited which may have helped exaggerate the gains. In London is was quiet with the ZH improving $1 to finish at +37.80 while the HK was also slightly firmer at +11.10. However, the WP slipped lower with the ZH ending at 138.20 and the HH WP at 100.40. The main driver of the rally was the macro as the USD dropped on the back of an unexpected drop in US job openings is nearly 2 ½ years. This could lead to less aggressive Fed interest hikes. The USD Index has fallen just over 4% since it hit 20 year highs last week. This weakness saw the vast majority of commodities higher. Sugar probably found further support from a stronger BRL which held around unchanged on the previous day at 5.17. It has also gained strength from Bolsonaro’s better performance in Sunday’s Presidential election which may mean he has a chance to retain his Presidency when the next vote is concluded at the end of the month. Bolsonaro is seen more positive for the Brazilian economy than Lula. Crude gained nearly $3 per barrel yesterday on expectations that OPEC will cut their crude output when they meet today.

Brazil continues to see rains across the CS which seem likely to continue for the next 10 days at least with periods of dry weather. It is likely field operations will continue to be hampered by the rain which probably means a long harvest tails with crushing continuing to the end of the year. While short term disruption is expected the rains will be seen as good for next season’s cane crop.

This morning the market opened 4 points firmer before improving further. Currently, prices are 9 points firmer with H-23 hitting 18.00 cents. The HK is 1 point weaker at +76 while the KN is unchanged at +39. In early London trading the ZH is firmer at +39.00 while the HK is a tad weaker at +10.80. The macro is mixed this morning after the gains seen in most markets yesterday. The USD index is firmer with crude a tad lower. After yesterday strong performance it would seem the market will remain firm especially as the nearby structure remains strong, but there would seem little reason for prices to improve too much more with a production surplus for the season expected. However, the market awaits confirmation from the Indian government over their export plans for the season. Some are now calling for more than 5 million tonnes in the first tranche. Some announcement is expected later next week.