Sugar Market Report for 16 December

It was a particularly volatile session in sugar yesterday as the market hit seven year highs before dropping back and ending in the negative column. The market had opened 1 points lower before dropping slightly lower in early trading. However, it was not long before prices started to improve with a gradual improvement until the highs of the previous session were reached. A breach soon triggered buy stops which then triggered further stops as prices broke above the November high. Prices shot up to their highest levels since February 2017. However, prices soon turned lower as follow through buying failed to materialise. Remarks by an Indian government official that more exports may be allowed during January had little initial impact but as the macro turned negative the market started to drop with prices eventually dropping into the negative column and ultimately below 20 cents. The market did eventually find some support around 19.90 where prices remained through to the close. The HK lost 8 points to end at +120 and the KN was down 4 points at +78 still maintaining the strong premiums despite the weakening of the flat prices. London was less volatile although the HK dropped over $3 to end at +14.80 while the KQ saw a modest drop of under $1 to finish at +17.80. The HH WP finished at 104.50 while the KK WP closed at 116.20. After the strong performance of the previous two sessions, another spike higher was always likely as the sellers backed off and more enforced liquidation was triggered. However, emphasising the major role the macro has played recently a drop in crude and a strengthening USD saw most commodities drop with sugar more pronounced as the UK and ECB increased interest rates yesterday and the Fed suggested rate will remain high for longer than the markets had anticipated.

India’s Food Secretary Sanjeev Chopra said yesterday that the Government may consider increasing the export quota from its current 6 million tonnes in January once an assessment has been made as to how the 2022/23 harvest is progressing. Indian mills will be keen to take advantage of a small window of opportunity to conclude sales before the next Brazilian harvest gets going and Thai sugars also compete. However, a decision is unlikely until late in January and maybe only a minimal amount. Chatter has been that production will fail to reach last year’s massive record production of 36 million tonnes.

Pakistan finance ministry announced yesterday that the Government has lifted a ban on sugar exports, aiming to allow up to 100,000 tonnes of shipments in fiscal year 2022/23.

This morning the market opened 10 points lower before dropping further on follow-through liquidation after yesterday’s weak settlement before recovering slightly. Currently, the market is 7 points lower. Both HK and KN are unchanged this morning at +120 and +78 respectively. In London, the HK is firmer at +16.50 while the KQ is unchanged at +17.80. The macro is mixed this morning with crude lower, grains/soya mixed and the USD Index barely changed after its improvement from seven month lows yesterday. Yesterday’s spike higher was generated mainly from buy stops and there appeared to be limited fresh buying. Nevertheless, the structure still remains very strong and suggests a huge collapse is unlikely in the short term. However, a return to yesterday’s high seem equally unlikely although the macro and the USD will continue to dictate direction while the market awaits fresh news on how the Indian sugar production is progressing. The lack of Indian raws for shipment is unlikely to change in the short term.