Sugar Market Report for 16 March

Good morning,

The market gapped lower yesterday ending at its lowest level since 2^nd March and some 116 points off the recent highs. The market had opened 28 points lower leaving a chart gap between 19.00 and 18.90 before swiftly dropping another 15 points. There was a partial recovery back to opening levels before sliding again as crude weakened further. The lows of the day were reached by mid-day with the market then remaining at the bottom end of the day’s range until the close when some late short covering pulled prices off the lows to settle in the middle of the day’s range. The KN improved a couple of points to +5 while the NV slipped 5 points to finish at -13. In London the KQ was unchanged at +9.80 while the QV was firmer at +7.80. This meant the KK WP ended stronger at 109.80 while the VV WP was unchanged at 90.40. The continuing slid in crude prices weighed on most commodities yesterday although the losses were limited compared to crude which was, at one point yesterday, some 28% off the highs. Sugar was no exception especially as the link between sugar and crude is strong. The drop in crude may see calls from the Brazilian government for a cut in gasoline and diesel prices which increased last week but an immediate cut would seem unlikely.

While the link between sugar and crude has been highlighted over the past couple of weeks the overall fundamental picture for sugar remains, in the short term, negative with the large Indian exports covering supply gaps left by lower Brazilian shipments. Looking further forward there is still much uncertainty on the Brazilian CS crop. The drought of last year is now a distant memory but how much the cane has recovered remains to be seen. The rains have continued into March which will continue to help the cane but there is a limit as to how much of the damage will be undone in just one season. There are also questions on how much beet will be planted across the EU given the very strong wheat prices which could encourage beet areas to be planted with wheat the price of which is unlikely to drop too much. However, farmers have missed the ability to plant higher yielding winter wheat so any significant change may not be seen until next harvest.