Sugar Market Report for 11 January

The market jumped significantly yesterday as fresh buying in the front month and spread resumed. The market had opened unchanged before slipping slightly to post the lows of the day. The market then started to steadily improve over the next six hours of trading. There was a slightly set back mid-afternoon as light liquidation was seen but the buying soon returned with a couple of buy stops triggered as prices broke 19.55 which propelled prices up another 30 points. The buying, eventually, dried up which saw prices drop back. Perhaps emphasising the speculative nature of the move prices dropped 16 points during the settlement and post-settlement period as day traders liquidated. However, the structure improved with the HK gaining 20 points to finish at +131 having topped +138 at one point. The KN also gained 10 points to end at +72. London strengthened as well with the structure also improving. The HK gained over $2 to end at +19.80 while the KQ was also $2 stronger at +18.10. The HH WP ended barely changed at 113.10 while the KK WP was stronger at 122.20. Yesterday cemented the view that the lows are in place for the time being with good buying noted below 19 cents. This encouraged good short covering and fresh buying which met with limited selling until above 19.60.

The outlook for global production continues to look positive. The Indian and Thai harvests are both going well although there is some chatter that yields in some Indian areas may be disappointing but for the time being most are maintaining their view that India will produce around the same amount of sugar as last season. The Brazilian 2023/24 harvest is likely to start as early as possible weather permitting to crush the remaining standing cane that was missed during 2022/23 when rains curtailed the crush. However, it would appear some trade houses are taking the view that the bulk of this production will not be available for delivery against H-23 hence the strong H-23 premium over the rest of the board.

There was a headline yesterday that India is reviewing their current export curbs on Sugar and Wheat. It is generally expected that more exports of sugar will be allowed over and above the 6 million tonnes already announced. However, no one will be holding their breath as to how long it will take for a fresh announcement.

This morning the market opened 9 points lower but soon recovered. Currently, prices are 4 points firmer. The HK and KN are unchanged at +131 and +72 respectively. In early London trading the HK is $3 firmer at +23.80 and the KQ is unchanged at +18.40. This morning the macro is mixed with crude lower while grains/soya is slightly firmer. The USD Index is also a tad firmer while the BRL ended slightly firmer last night at 5.20 back at the level seen before the rioting in Congress on Sunday. The market looks set to remain firm after the rally yesterday. Whether the market can continue to climb remains to be seen with many undecided as to what direction may be seen. Nevertheless, the strength of the HK suggests a collapse in the flat price will not be seen for the time being with good buying building at 19 cents.