Sugar Market Report for 10 November

The market spiked higher yesterday hitting its highest level since 19th July as fund buying met with good Indian producer selling. The market had opened 5 points lower before slipping further to put the lows of the day in place in early trading. The market spent much of the morning within the previous day’s range but as US traders got to their desks more fund buying appeared quickly taking prices higher. It would appear the breaching of the 19 cent level triggered the buying. Good producer selling, mainly from India, was noted and this did, initially, stop the rally at around 19.25 with prices dropping back to 19 cents. However, another wave of fund buying took prices through the earlier highs as buy stops were triggered which saw prices hit 19.43 on the close. Prices did drop back to below 19.30 post-settlement but it was an impressive performance and, probable, a surprise to most. The HK improved 4 points to +98 while the KN was 9 points firmer at +66. In London, it was a quieter affair with the ZH and HK marginally lower at +19.80 and +6.80 respectively. The OI in Z-22 fell to 20,865 lots with another 11,147 lots traded yesterday. The WP also slipped with the ZH ending at 116.20 and the HH WP at 96.40. There continues to be no outstanding bullish factor to explain the rally. However, the funds have bought meeting limited resistance until prices pushed above 19 cents where Indian selling was waiting after the Government announced 6 million tonnes of exports will be allowed in the first tranche of export quotas. There does remain concerns over Brazil’s CS to better last year’s total sugar production of 32 million tonnes. Unica will release the second half October harvest date today.

As expected Indian sugar mills have sold into the rally as they sign large quantities of export deals. At least 1 million tonnes of exports have been concluded and it is expected that the entire 6 million tonnes could be sold by the end of the year with shipment periods out to March.

Rabobank reported yesterday that they see Brazil’s CS total cane crush of 575 million tonnes for 2023/24 compared with 540 million tonnes this season. They see CS total production at 35 million tonnes up from 32.5 million tonnes this season.

The USDA reported yesterday that they have lowered their outlook for sugar supplies in the US this season. The USDA estimate total sugar supply for 2022/23 at 14.34 million short tonnes compared to 14.54 million short tonnes in their October estimate. Therefore they have lowered their stocks-to-use ratio at 13.5% down from 14.8%

As mentioned above Unica will release their harvest data for the second half of October at 15:00 (London time). A S&P poll sees the crush for the period around 30 million tonnes producing 1.88 million tonnes of sugar from a 47/53 split. Last season the crush was almost finished as the cane continued to suffer from the extreme drought. Just 17 million tonnes of cane was crushed producing 858k tonnes of sugar.

This morning the market opened 12 points lower but not too far from the last traded price yesterday. Currently, prices are 8 points weaker. The HK and KN are unchanged at +98 and +66 respectively. In early London trading, the ZH is slightly weaker at +19.20 while the HK is virtually unchanged at +7.00. The macro is mixed this morning with crude lower, grains/soya mixed and the USD Index slightly weaker. The BRL ended around unchanged at 5.17. The market has seen an impressive recovery from the lows hit less than a fortnight ago. The near 190 point rally has been exaggerated by fund buying initially covering shorts but now build longs. It could be argued the market has rallied to where the biggest volume was waiting and needed to rise to allow Indian mills to sell. The market could improve further as the funds continue to buy but with more Indian selling and a likely global surplus for the season, it is difficult to justify any further significant gains. Unica is not likely to have any significant impact unless sugar production comes in a lot lower than expectations.