Sugar Market Report for 15 February

The market rallied yesterday regaining all the previous day’s losses to end virtually unchanged to Friday’s settlement. The market had opened 4 points firmer before swiftly dropping 8 points and to the lows of the day. However, prices soon improved gaining nearly 30 points over the next couple of hours. The market then became somewhat becalmed remaining within a 20 point range until late in the session when more buying appeared taking prices up to the day’s highs on the close although fell back during post-settlement trading. The trading volume dropped as the fund roll ends to 150k lots. The HK continues to remain very firm gaining 5 points to end at +157 its highest settlement. The KN also gained 2 points to end at +61 still near the bottom end of the 3 month range. In London with the H contract put away for another year the KQ improved $2 to end at +17.40 while the QV gained $1.50 to end at +13.50. This meant the WP improved with the Kk WP ending at 128.80 while the KQ was at 111.40. The strength of the spot month continues to dominate proceedings as the long liquidation of Monday was replaced by fresh buying yesterday. H-23 option expiry today may add to the volatility.

The ICE exchange confirmed yesterday that a total of 3,819 lots were delivered against H-23. Man and Alvean were receivers while Louis Dreyfus, Wilmar and Sucden were the deliverers. All sugar was Indian with 3,287 lots delivered from Kandla and 532 lots from Kakinada.

A Reuters poll by 11 traders and analysts, published yesterday, see raw sugar prices down at 18.50 cents by the end of 2023 with white sugar at $520. A global surplus of 3.25 million tonnes is predicted for the current 2022/23 season and another 4.2 million tonne surplus for 2023/24. Brazilian CS sugar production is expected to increase to 36.10 million tonnes for the 2023/24 harvest which will start at the beginning of April. The sugar mix is seen at 46% but this could change depending on Brazil’s fuel policy. Logistical problems shipping sugar out of Brazil’s main ports could cause issues and delays as shipments compete with the country’s grain exports. However, it will not impact on the amount of sugar produced. Indian production is seen falling from the record levels of 2021/22. Similar production of around 34.7 million tonnes is expected for the next two harvests. It should be noted that these polls are notoriously inaccurate!

This morning the market opened 10 points lower before slipping another 13 points mainly on the back of a negative macro picture. Currently, prices remain down at 15 points lower. The HK is 3 points firmer at +160 while the KN is unchanged at +61. In London the KQ is firmer at +18.30 while the QV is also firmer at +14.10. The market is caught between strong spot market, negative macro picture and the prospects of an improving supply picture which is expected to result in a global production surplus. As mentioned H-23 option expiry today which could cause some fireworks later today although the overall negative macro picture may dampen things.