Sugar Market Report for 13 December

The market dropped yesterday mainly on better than expected Unica harvest data. The market had, somewhat surprisingly, opened 8 points firmer but immediately turned lower and within a few minutes fell into the negative column where it remained for the rest of the session. Prices slipped lower throughout the morning before, eventually, finding some support around 19.40. This did trigger some light day trader short covering just in front of the Unica announcement but once published prices dropped to the lows of the day only marginally recovering and settling at the bottom end of the day’s range. The HK saw some profit taking as it lost 8 points to end at +106 its lowest level in a week. The KN also weakened losing 4 points to finish at +63. In London the HK slipped to +13.60 while the KQ lost over $2 to end at +16.50. The WP also weakened with HH WP down at 106.70 and the KK WP at 116.50. It would appear the Unica data was in the market before official publication as prices dropped in early trading. The market still remains caught within the range of the past 10 sessions albeit at the lower end. The trading volume remains under-whelming with traders still unsure of direction.

Unica published their harvest data for the second half of November yesterday afternoon. The crush and especially the sugar production was above expectations. The crush for the period reached 16.23 million tonnes producing 1.030 million tonnes of sugar from a 47.64/52.36 sugar/ethanol split. Given the chatter regarding rain and limited field activity, the production was higher than had been predicted. The cumulative crush has now reached 532 million tonnes, over 10 million tonnes more than the same time last season. Sugar production is now just over 900k tonnes more than this time last year when the season had, effectively, finished as the drought took its toll. There has been a lot of chatter about the majority of mills ending operations for the season due to wet weather. Unica reported that 84 mills were still operational as of early December but, of these, 27 are likely to cease operations during the first half of December. Analysts are now seeing total crush reaching 553 million tonnes and total sugar around 33.6 million tonnes. This extra sugar may help to ease the physical tightness which has seen the HK premium climb to over 120 points last week.

This morning the market opened 9 points higher before slipping back. Currently, prices are 2-3 points higher. The HK is unchanged at +106 while the KN is 1 point weaker at +62. In early London trading, the HK is unchanged at +13.60 as is the KQ at +16.50. This morning the macro is positive with most commodities trending higher while the USD Index is slightly lower. Despite the better than expected Unica report the market continues to appear well supported and, unless the funds decide to liquidate, then the downside would seem limited. However, potential to push back to above 20 cents is now looking more unlikely so perhaps we remain range-bound as the market quietens for the upcoming holidays.