Sugar Market Report for 12 January

The market poked its head above 20 cents momentarily yesterday but, eventually, fell back to unchanged by the close. The market had opened 9 points lower but soon recovered and continued to improve until it tested the 20 cent level with traders possibly seeking stops above. As none were triggered the market quickly fell back leaving the highs for the day in place. The market then slowly sagged lower with some aggressive selling noted mid-afternoon which quickly took prices down some 20 points from which there was little recovery with prices soon slipping into the negative column before recovering back to unchanged by settlement. The HK improved to +144 in early trading but dropped back to unchanged by the close at +131. The KN ended 1 point weaker at +71. In London an early jump in the HK soon disappeared as it dropped $150 to end at +18.40. The KQ finished a tad firmer at +18.40 as well. This meant the HH WP slipped to 110.80 while the KK WP ended at 121.30. A test of 20 cents was always likely after the strong performance the previous session but it triggered little fresh buying once achieved which prompted a bout of liquidation which took prices back to opening level. The market appears to be trying to find a level after the volatility since the beginning of the year.

Unica released their CS harvest data for the second half of December yesterday afternoon. The season is now essentially over with just 2.63 million tonnes of cane crushed and a minimal 165k tonnes of sugar produced. This brings the cumulative total of cane crushed to 541.57 million tonnes and total sugar production of 33.46 million tonnes. The odd mill is likely to continue operations into January which could increase the total to 33.7 million tonnes but the season is now done and dusted and prospects for the 2023/24 season now become the focus. Undoubtably, the rains since early November have meant a lot of cane has been left uncut this season. Weather permitting mills will start the season before the usual beginning of April which will boost early production after a late and slow start to the current season. There has been chatter that the Brazilian Government is preparing to reinstate federal taxes on fuels from March which would favour ethanol production. President Lula seems likely to take up where Bolsonaro left off and dictate who runs Petrobras. However, his instructions may be very different to the previous President who was keen to keep pump prices low. Of course crude prices are now lower but could increase during this year according to several bank analysts. Therefore, much could change over the coming months. However, the cane crop should be in good condition after good rains.

The Thai cane crush is now in top gear with all the country’s 57 mills now operating. As of the 10th January total crush had reached 26.3 million tonnes 4% up year on year while total sugar production had reached 2.6 million tonnes up just over 8.5% compared with this time last season aided by higher sugar content. Analysts are now pencilling in around 107 million tonnes of cane which could produce around 12 million tonnes of sugar around 1.9 million tonnes more than last season and over 4.4 million tonnes more than their poor 2020/21 season which was blighted by drought.

This morning the market was particularly volatile on the opening with a 14 point range seen within the first minute of trading. The market opened 1 point firmer before improving another 10 points only to fall back to 3 points lower. Currently, the market is 1 point firmer. The HK and KN are both unchanged at +131 and +71 respectively. In early London trading the HK I a tad firmer at +18.50 as is the KQ at +18.80. This morning the macro is mixed with crude around unchanged grains/soya slightly firmer and the USD Index around unchanged. The BRL improved yesterday to end at 5.18 appearing to have shrugged off the violence and rioting seen in Brazilia on Sunday. The market appears to be trying to find a level having tested 19 cents and 20 cents within three sessions. The structure still remains firm so no huge collapse likely with end-user buying below 19 cents at the moment. Whether the market will see another test of the 20 cent level remains to be seen but cannot be ruled out as the expiry appears with just over 6 weeks to go.