Sugar Market Report for 12 May

Good morning,

The market made a new yesterday and ended virtually unchanged despite crude jumping 5% and chatter about lower sugar production out of Brazil. The market had opened 8 points firmer before remaining in a 10 point range for the rest of the morning with support at unchanged noted. However, as US traders got to their desks prices started to slip and lost over 20 points over the next hour to hit their lowest level since 16th March and forming a double bottom at 18.44. However, once the selling dried up a decent bounce was seen with prices swiftly improving to hit the highs of the day before soon slipping back to around unchanged by the close. The trading volume was, again, poor at just over 83k lots. The NV slipped 2 points to -14 while the VH ended 1 point better at -29. In London the volume was better than of late but lost ground to NY. The QV was weaker at +9.20 while the VZ dropped to +1.10. The flat price weakness saw the VV WP weakened nearly $3 to 93.80 while the VZ WP slipped $2 to 92.70. Yesterday’s performance emphasised the inherent weakness of sugar at the moment. The macro was particularly positive yesterday with crude leading the way. Even bullish chatter from the NY sugar dinner gathering had little impact.

The headline comments from NY conference week was that Louis Dreyfus see a large proportion of the Brazilian CS cane crop being used to make ethanol at the expense of sugar. Director Enrico Biancheri said during the Citi ISO Datagro conference that the CS will only produce 29 million tonnes of sugar during 2022/23 which is at the bottom of recent estimates. He said that at current prices levels the world is heading for a sugar shortage which is a fairly dramatic statement after other analysts predict a relatively large global production surplus next season.

At the same seminar Datagro’s chief analyst the respected Plinio Nastari, was less bullish although also saw Brazil’s CS sugar production at 32.1 million tonnes little changed from last season. He put the sugar/ethanol split at 43.8/56.2. He also lowered his cane estimate by 10 million tonnes to 552 million tonnes from his last estimate. However, he still sees a global production surplus of 2.86 million tonnes in 2022/23 up from a 1.42 million tonne surplus for the current 2021/22 season. Earlier in the week Stone X predicted more than a 4 million tonne surplus for 2022/23.

According the China’s agricultural ministry the country will produce 10.35 million tonnes of sugar during 2022/23 with consumption at 15.6 million tonnes so imports are seen at 5 million tonnes. This production figure would be about 400k tonnes more than produced this season. The consumption figure is on the assumption that the Covid restrictions gripping the country at the moment eventually ease and spending will resume.

This morning the market opened 8 points lower mainly on the back of a lower crude quote and stronger USD before dropping lower to breach the double bottom at 18.44 and hit its lowest level since the beginning on March. Currently, prices are 14 points lower. The NV is unchanged at -14 while the VH is 1 point lower at -30. In early London trading the QV and VZ are virtually unchanged at +9.30 and +1.20 respectively. The macro is a negative picture this morning with most commodities lower while the USD index has made a new high of 104.40 its strongest level since December 2022. The market remains under pressure probably more from the macro than a shift in fundamental news. Indeed uncertainty over the Brazilian CS crop remain uppermost in traders’ minds especially after several analysts revising down their production levels over the past week. Having broken lower again today there appears to be little technical support until 18.00 cents. However, it would seem unlikely a drop to these levels is on the cards for the time being especially as the outcome of the Brazilian crop is unclear. Additionally, the Indian monsoon is now only weeks away. While a normal monsoon is predicted there could still be issues which could impact on production.


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