Sugar Market Report for 1 November

Good morning,

The market made a decent turnaround yesterday rallying just under 40 points whipping out the losses of the two previous sessions. The market had opened 12 points firmer before gaining another 14 points before it slipped back to opening levels. However, more short covering appeared which saw prices gradually improve over the remainder of the session to settle just below the highs of 18 cents. The main driver to the flat price strength was some good short covering after the market had dropped heavily from the highs of mid-October and the strengthening of the spot month premium. The HK gained 15 points to end at +108 while the KN also gained 14 points to settle at +60. The lack of clarity from the Indian Government over their export policy was probably the main reason for the nearby strength. It was a similar picture in London where the ZH surged by $5 to finish at +36.10 while the HK was up $$1.60 at +9.60. This meant the WP also improved with the ZH WP $3 higher at 131.00. However, the HH WP slipped to 95.00 mainly on the strength seen in NY. A correction was probably overdue after the market had dropped nearly 140 points in 10 sessions. The catalyst was the slightly ambiguous statement from the Indian Government that they would continue to curb exports through to the start of next season. Although traders still expect exports to be allowed the lack of information is beginning to concern traders.

All eyes remain on the two largest sugar producers. Brazil sees Lula Da Silva elected President after his narrow victory over Bolsonaro. The Brazilian markets were, obviously, pleased that the uncertainty is now over. Their main stock index rallied along with the BRL which ended over 2% better at 5.17 but volatility is likely to continue. It is unlikely to have too much impact on sugar in the short term. India’s delayed announcement of their export policy is now being viewed as bullish as the Government remains tight-lipped on policy. It is still expected that they will allow 5-6 million tonnes in the first tranche then another 3-4 million tonnes once an indication of sugar production for 2022/23. Every day we are told an announcement is imminent but Indian millers are aware they have a small window of opportunity to make sales before Thailand and Brazil close in.

This morning the market gapped higher opening 8 points firmer before immediately improving another 10 points as some light buy stops triggered as prices jump above 18 cents. The HK is 3 points firmer at +111 while the HK is 1 point better at +61. In early London trading, the ZH is slightly firmer at +37 while the HK is slightly weaker at +8.70. The macro is a positive picture this morning with all commodity markets higher. The USD Index has taken a tumble giving back all the gains of yesterday. The market looks as if it will improve further buoyed by positive macro and uncertainty regarding India. The strengthening spot month premium will be a deterrent to sell the flat price and there will be limited producer selling in the spot month. In the very short term, the chart gap between 17.97 and 18.05 is likely to be filled before long.