Sugar Market Report for 2 December

Yesterday saw a quiet day with a narrower range than of late as prices try to consolidate. The market had opened 7 points firmer on a better macro picture. However, prices soon started to turn lower and remained under pressure for much of the session reaching to the lows of the day mid-afternoon. As the macro improved further with crude up nearly 3% and the BRL rallying prices started to improve as day-traders covered shorts which took prices into the plus column again eventually hitting the day’s highs. However, there was limited fresh buying and prices soon weakened to close around unchanged. The HK was 1 point weaker at +106 while the KN was 2 points weaker at +61. In London, the HK dropped $1 to +11.70 while the KQ ended slightly firmer at +16.90. This meant the HH WP finished slightly weaker at 105.80 and the KK WP slightly firmer at 117.50. The market saw just under 85K lots of traded volume yesterday suggesting the market appears to be content around current levels with the large fund long position weighing above the market but concerns over short-term physical tightness supporting prices. There has been chatter of rain hampering the latter stages of the CS crush. Obviously, there is usually increasing rains at this time of year and will be seen as very beneficial for the next harvest. The forecast for the next ten days is for some more rain episodes but there would appear to be enough drier periods to enable some activity which should allow total production to get to around the 33 million tonnes that most analysts have pencilled in for 2022/23.

The Indian Sugar Mills Association released their latest output data for the current 2022/23 season. It would appear the harvest has got off to a good start with production reaching 4.8 million tonnes by the end of November compared with 4.7 million tonnes produced in the same period last year. Harvest conditions are good as the crush gets into top gear. Although, with many weeks to go before the harvest finishes these early figures suggest last season’s record production of 36 million tonnes may be beaten.

Brazilian sugar exports for November reached 4.075 million tonnes which is nearly 35% higher than in November 2021 when 2.662 million tonnes were exported. This increase was broadly expected but it is a large increase over last year given production is likely to be only marginally higher this year.

This morning the market opened 4 points firmer before immediately dropping back. Currently, prices are 15 points weaker. The HK and KN are unchanged at +106 and +61 respectively. In early London trading, the HK is a tad firmer at +12.20 while the KQ is unchanged at +16.90. This morning the macro is a slightly negative picture with crud slightly lower as are most other commodities while the USD index is a tad lower. The BRL improved against the USD to end yesterday at 5.19. The market is trying to consolidate but the bulls will be slightly concerned that on a day when crude improved and the BRL strengthened that prices ended unchanged. The funds appear to be content with their longs position but in no hurry to increase. The market looks likely to drift a little lower but any significant collapse would seem unlikely while the structure remains so firm. Perhaps prices remain between 19.00 and 20.50 for the time being.