Sugar Market Report for 1 February

The market continued to rocket higher yesterday hitting another multi-year high as fund and speculative buying met with limited selling resistance. The market had opened 4 points firmer and continued to improve gaining another 40 points by mid-morning with buy-stops triggered at 21.50. Prices then took a breather until US traders got to their desks when another wave of buying took prices up to new highs. A sharp pull-back of over 30 points was then seen on speculative long liquidation. However, this was short-lived with prices soon climbing again to hit the highs of the day on the close. The trading volume was very good again with nearly 60% spreads. The HK improved 1 point to end at +132 while the KN increased by 8 points to +91. In London the spot month continued to slip against the rest of the board with the HK ending at +7.60 while the KQ improved to +19.80. However, the WP ended barely changed with HH WP at 101.00 and the KK WP at 122.50. The market had gained 290 points since the 9th January and 175 points in just 4 sessions. Many believe this move is now overdone but with limited selling and aggressive buying, it has been one-way traffic.

ISMA announced yesterday that they have down-graded their sugar production estimate for India to 34 million tonnes from their earlier estimate of 36.50 million tonnes. This is due to lower yields in key cane states because of adverse weather. This is seen as meaning no further exports will be allowed by the Government over and above the 6 million tonnes already approved. Whether actual production falls as much as 2 million tonnes from last season remains to be seen. Currently, the general consensus is that it could be higher at around 35 million tonnes. This time last year ISMA were still predicting 32 million tonnes. While yields may be lower the planted area was higher.

StoneX see a 5 million tonne global surplus in the current 2022/23 season compared with a 1.2 million tonne deficit in 2021/22. They see Brazilian production reaching 36 million tonnes from a cane crop of 588.2 million tonnes due to good rains.

The Australian analyst, Green Pool, sees things slightly differently. Based on national crop years they predict a small global surplus of 1.77 million tonnes in 2022/23 but falling to a deficit in 2023/24 of 1.01 million tonnes due to lower output in India, Pakistan and the EU. This will be off-set to a certain extent by an increase in Brazil’s CS to 35.8 million tonnes. They predict consumption will increase by 1.24% to 192.8 million tonnes a slight slowdown from 1.36% growth last season.

This morning the market opened 4 points higher. Currently, the market is 8 points higher. The HK is 2 points firmer at +134 while the KN is also 2 points firmer at +93. In early London trading, the HK is slightly weaker at +7.30 while the KQ is unchanged at +19.80. The macro is mixed this morning with crude higher while grains/soya are slightly lower. The BRL ended slightly firmer yesterday at 5.07. The market continues to look strong with a new high for the move seen in early trading. While the market is now technically over-bought it doesn’t necessarily mean a marked correction will be seen and could be the case of some consolidation at these higher levels. It still appears to be a squeeze on shorts and end-buyers caught out and they will buy into any dips.