Sugar Market Report

Good morning,

The market failed to push higher yesterday and, despite, a positive macro picture ended lower and below 15.50. The market had opened positively up 8 points before improving further to hit the highs of the day (15.94) shortly after the opening. Prices then remained caught within a narrow 14 point range in thin volume for the rest of the morning. Prices stated to slip lower soon after US traders got to their desks but the market continues to remain quiet. However, eventually, with seemingly little desire to push higher more selling appeared taking prices into the negative column. A half-hearted bounce back to unchanged was seen but, as the close approached, another bout of selling appeared taking prices down to the lows of the day settling just 2 points off the lows. The HK dipped by 5 points to finish at +85 while the KN ended 4 points weaker at +41. In London the market continues to out-perform NY price wise with less speculative selling seen. The HK ended virtually unchanged at +16.60 while the KQ finished better again at +12.80. This meant the WP continued to improve with the HH WP ending nearly $3 better at 95.20 while the KK WP also improved to 97.30. It was a disappointing performance in sugar which had looked likely to test the 16 cent level in early trading. During the afternoon the USDA report had soybeans, wheat and corn jumping to new highs which may have been a factor in the drop in sugar. The funds may see better opportunities in these markets at the moment. However, crude also hit 11 month highs on news that Saudi plans to limit supplies and the BRL improved against the USD to a 1 week high of 5.323.

One of the drivers of better sugar prices over the past few months has been to heavy buying from China. It is thought they imported around 5.5 million tonnes of raw sugar last year. It would now seem their stocks are more than adequate as much of the imports were surplus to their internal requirements. According to analysts this will mean lower overall imports during 2021 and probably very little during the first quarter of this year with estimates of between 1.5 and 2 million tonnes of stocks sitting in bonded warehouses. Other traders believe April will be the earliest China will import significant quantities again.

Sugar production in the North and Northeast of Brazil rose to 2.16 million tonnes by the end of the year. This is around 6% higher than the same period last year. This was from just under 40 million tonnes of cane.

The Thai sugar harvest is still slow. As of the 7^th January with just 14 million tonnes of cane crushed which is 43% below the same time last year. Sugar production has reached 1.3 million tonnes which is down 54%. Many mills had delayed the start to the season probably hoping the cane might improve as recent rains helped the cane after months of very dry weather. However, as of the 5^th January all 57 mills were operating.

The USDA reported yesterday they estimate US sugar production for the 2020/21 season at 9.16 million short tons. This is just over 10% higher than last season’s total of 8.15 million short tons. They see imports for the season lower at 3.34 million short tons compared with around 4.2 million shorts tons last season.

France’s 2020 beet harvest was disastrous as final figures are declared. The yield was below 65 tons per hectare which is the lowest level since 1987/88. The main reason was Yellow virus disease which, with poor growing conditions, took a huge toil on the crop. The main reason for the surge in disease was the banning of Neonicotinoids pesticide sprays. The French government has relaxed the ban for the coming season. It was also announced that the UK government has approved the use of neonicotinoids for sugar beet for this year. An emergency permit has been approved to treat sugar beet (mainly seeds). This should help eliminate the threat of yellow jaundice disease for the coming season. This news has come just in time for farmers to plan their growing programme for the year.

This morning the market opened 9 points firmer before improving another 7 points. Prices currently remain around 12 points higher. The HK and KN are unchanged at +85 and +41 respectively. In early trading in London the HK is $1 weaker at +15.60 while he KQ is also a tad weaker at +12.50. This morning the macro is positive again with the majority of commodities trending higher. The USD is around unchanged. The market seems set to remain range-bound for the time being with resistance at above 15.90 but support seen at 15.40. One could argue that current prices are fair given current fundamentals. The funds are still dominating the situation. With their ability to buy more sellers are wary. As mentioned before whether the HK premium is justified remains to be seen. Demand may be less robust than anticipated and this may start to weigh on prices eventually.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Kevin Watkins, Steven Trigg

Phone: +44(0) 20 7716 8598

Email: admisi.sugar@admisi.com

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