Sugar Market Report for 11 November

The market ended a tad firmer yesterday after the macro improved significantly allowing earlier losses to be erased. The market saw volatility on the opening starting 8 points lower but immediately gained another 10 points before swiftly dropping back. Prices then improved but good selling noted at 19.40. Eventually more long liquidation appeared as US traders got to their desks with prices dropping to 19.08. However, with US inflation figures better than expected, prices started to improve as the USD collapsed. Even the relatively bearish Unica data had little impact with prices ending the session a tad higher on the day with a double top in place at 19.43. The HK improved 3 points to +101 while the KN ended 5 points firmer at +71. In London the spot month jumped with the expiry on the 15^th November. The ZH gained $5 to end at +24.70 as shorts continued to cover. The OI dropped to 16,442 lots with another 9,636 lots traded yesterday. It continues to look as if around 500k tonnes will be delivered. It was another strong performance aided by a big turnaround in the macro as the markets reacted to the news that US inflation may soon start to ease. Equities rallied while the USD plummeted. This saw all commodities improve. Sugar was no exception although the gains were minimal compared with others. This was perhaps because Unica data was bearish and the BRL weakened by over 3.5% yesterday on concerns about who Lula may make economic minister.

Unica released their harvest data for the second half of October yesterday afternoon. It showed that 31.5 million tonnes of cane was crushed during the period producing 2.12 million tonnes of sugar from a split of 48.54/51.46. This was better than the 1.88 million tonnes of sugar predicted in a S&P survey. The crush and production was massively higher than same time last year which was expected as the harvest was virtually over by this time in 2021 due to the impact of drought and frosts. Cumulatively, the crush and production are still down year-on-year but catching up fast. It is likely that sugar production will be bettered by the end of this month and does suggest last year’s total of 32 million tonnes will be bettered as the crush continues through to the end of the year.

This morning the market opened 4 points firmer before improving on the back of a continuing positive macro picture. Currently, the market is 15 points firmer. The HK is 3 points firmer at +104 while the KN is 2 points better at +73. In early London trading the ZH is firmer at +26.60 while the HK is also a tad firmer at +10.60. The macro, as mentioned above is positive this morning as the USD continues to weaken. The USD Index has dropped back to its lowest level since August and has dropped nearly 5% since the beginning of the month. Virtually all commodities are higher on the weakness of the USD and that if inflation is being tamed in the US then it will mean possible better demand and lower chances of a long recession. Sugar is caught up in the macro-hype and is likely to improve further as the funds seem likely to add to their longs. However, this improvement is excellent news for Indian exports who can price at higher levels than they would have expected just a month ago. Whether the gains are justified is open to debate. There is likely to be a correction sometime and it could be quite sharp as there is unlikely to be much resting buying below the market.