Sugar Market Report for 16 February

The market reversed direction again yesterday as a negative macro picture hung heavy over the market and the H-23 option expiry was a quiet affair. The market had opened 9-10 points weaker with the opening print soon the high of the day as prices immediately dropped another 10 points before light short covering supported prices. However, the market soon dropped again before settling into a narrow 9 point range for the rest of the morning and early afternoon. However, the weakness of the macro eventually weighed on the market enough to trigger further speculative selling which took prices down to the lows of Monday where support was found. Prices did manage to bounce off these lows thereby putting a double bottom in place at 19.61 as the market saw the second successive inside-day and prices ended similar to Monday. However, despite the flat price weakness the spot month improved again against the rest of the board as the HK gained 9 points to end at +166. However, the KN took a hit dropping 11 points to finish at +50 its lowest level since the 7th November. There is now a large disconnect between the spot month which remains firm and the rest of the board which is, increasingly, coming under pressure from the view that the expected global production surplus will start to impact. In London the KQ dropped $1 to end at +16.50 while the QV was modestly higher at +13.90. However, the WP improved with the KK WP up at 131.20 while the KQ ended at 114.70. Any plans to push the spot month flat price higher as option expired was thwarted by a distinctly negative macro picture as further US interest rate rises appear likely to be more than anticipated. Only cocoa saw a large gain as the USD strengthened and the BRL weakened to 5.21.

Little fresh fundamental news at the moment. Traders await an update on Indian production. They will be looking to see whether production is beginning to flag as many have suggested will happen. In Brazil, it continues to rain a plenty across the CS ensuring soil moisture levels are at their highest for several years and the drought that hit the 2021/22 cane is now a distant memory. Assuming it dries up by the second half of March, mills are likely to start operations early to cut the cane left standing at the end of last season.

This morning the market opened 4 points firmer before dropping back to unchanged in thin volume. Currently, prices are 2 points firmer. The HK is unchanged at +166 while the KN is 3 points firmer at +53. In early London trading the KQ and QV are unchanged at +16.50 and +13.90 respectively. This morning the macro has calmed after the weakness seen yesterday. Most commodities are trending higher while the USD Index is weaker. The market continues to be supported by the strength of the spot month so a collapse in price would only seem likely if H-23 starts to weaken which seems improbable at the moment. Support is seen at the double bottom at 19.61 and then at 19.43 in K-23. With nine trading sessions until expiry it is likely further volatility will be seen.

Please note NY Sugar will be closed Monday 20th February for the Presidents’ Day holiday. London will close 1 hour earlier.