Sugar Market Report for 6 December

The market pushed higher yesterday to form a double top at 19.94 before falling back to settle with modest gains. The market had opened 7 points firmer before continuing to improve on chatter than Indian sugar production will be lower than earlier expectations. Prices continued to improve throughout the morning and early afternoon before hitting the day’s highs. As prices approached 20 cents more selling appeared and this was enough to trigger some speculative long liquidation which saw the market give back most of the gains by the close after finding some support around 19.60 aided by an improving USD. The HK slipped 3 points to +112 as did the KN which ended at +65. In London, the spot month improved on further Indian chatter than all but 1 million tonnes of the 6 million tonnes initial export quota had been sold. The HK ended up at +13.60 while the KQ was a tad firmer at +17.90. This meant the HH WP jumped over $5 to end at 108.10 while the KK WP was also firmer at 119.20. The market, initially, pushed higher on the Indian news (see below) but appeared to run out of steam at the higher levels when it became apparent the funds were not going to increase their longs with the market appearing to be content to remain around the 19.50 cent level.

According to farmers and millers, India’s sugar output could fall by 7% this season as erratic weather conditions have cut cane yields suggesting total production will only reach around 33.50 million tonnes. Farmers are reporting yields are disappointing after a harsh summer and heavy rainfall in July. It is probably too early to make any firm predictions and most think we will have to wait until later this month. The latest ISMA update up until the end of November showed production had hit 4.8 million tonnes which is slightly ahead of last season not suggesting any large drop in production as yet. Whether it is just a matter of trying to talk the market remains to be seen. However, some traders believe that beating last year’s total of 36 million tonnes was a big ask and 35 million tonnes is a more realistic target. It is also thought that mills have sold all but 1 million tonnes of the 6 million tonnes export quota announced by the Government last month. To add to the production concerns the Thai harvest is seeing a late start due to wet weather while rains across Brazil’s CS have hampered field operations. Nevertheless, it is often wet at this time of year and will help the next cane crop while Thailand can quickly catch up with their harvest.

This morning the market opened 1 point lower in quiet trading. Currently, the market is trading 2 points weaker. The HK and KN are both 1 point firmer at +113 and +66 respectively. In early London trading, the HK is a tad weaker at +13.40 while the KQ is virtually unchanged at +17.80. This morning the macro is slightly positive with crude and most other commodities trending higher while the USD Index is virtually unchanged. The BRL weakened slightly against the USD yesterday to end at 5.28. The chatter out of India does not seem to have too much impact so far probably because prices are at an elevated level anyway and the funds have already established a large long position. Nevertheless, the concerns over Indian output will add support to the market especially for the front month until a clearer picture emerges. The strength of the front spread looks unlikely to diminish with concerns over a late start to the Thai harvest and harvest hampering weather across Brazil’s CS.