Sugar Market Report for 14 September

Good morning,

The market ended the day slightly firmer despite a generally bearish macro picture and slightly better than expected Unica data. London hit a 10 year high before easing lower but still maintains a hefty premium with two trading session before expiry. The market had opened 5 point firmer pushing higher from the opening. Prices continued to improve hitting their highest level since the middle of August and breaking above the triple top at 18.51/52 mid-morning. However, with the macro turning negative prices soon started to drop losing 37 points to hit the day’s lows just as US traders were getting to their desks. However, prices quickly reversed pushing back to the highs as the Unica harvest data for the second half of August was released. Again the rally faded with the market swiftly giving back the gains to end the day just 3 points higher on the day. The VH was unchanged at +40 while the HK gained 4 points to finish at +51. In London the volatility remains as the V-22 comes up for expiry. The spot month hit its highest level since August 2012 during the morning but prices soon slumped in very thin volume dropping over $20 by mid-day. The market then held in a relatively narrow range through to the close. The OI in V-22 dropped to 10,143 lots with another 7,380 lots traded yesterday suggesting the delivery will be small which is not surprising. The VZ ended lower at +59.30 while the ZH finished higher at +34.60. This meant the VZ WP ended lower at 141.80 while the HH WP was also weaker at 116.00. The market held well considering the negative macro which took a tumble as US inflation figures were higher than anticipated suggesting the Fed may have to be more aggressive in their interest rate policy. However, the strength of London would seem to be adding support to NY.

Unica released their harvest data for the CS yesterday afternoon for the second half of August. It showed that 44.026 million tonnes of cane was crushed during the period producing 3.139 million tonnes of sugar with a split of 48.45/51.55 its highest sugar level for the season so far with ethanol parity well below current prices. All three figures were better than anticipated and suggests total production will start to catch up last season’s total of 32 million tonnes over the next few weeks. Cumulative crush has reached 366 million tonnes down 6.91% year-on-year while sugar production has reached 21.77 million tonnes still 10.5% lower year-on-year. The ATR is similar at the moment to the same time last season but should better last season’s average of 140 by season end.

The French Farm Ministry reported yesterday they see total beet production down around about 1 million tonnes from last season at 33.33 million tonnes. French producer Cristal Union also reported yesterday that they expect a sugar yield of about 13 tonnes per hectare which is in line with average levels. The beet had fared better than other crops with the dry hot conditions but yields are likely to vary across the growing belt.

This morning the market opened 2 points firmer but has, subsequently dropped back and, currently, is 2 points lower. The VH is 1 point firmer at +41 while the HK is unchanged at +51. In early London trading the VZ is a tad firmer at +60.00 as is the ZH at +35.00. The macro is slightly better this morning after the negativity of yesterday. Crude is slightly lower while grains are, mainly, up. The USD Index is weaker after its surge higher yesterday. This impacted on the value of the BRL which dropped to 5.19 by its close. The market may fall back a little into the recent range but London will have an impact. Currently, it is supportive. The VH also remains firm which suggests physical tightness may grow while the India government is silent on its export policy for next season. While 2022/23 may be a surplus year the market needs Indian exports.