Sugar Market Report for 17 January

NY was closed yesterday for Federal holiday so London was quiet but buoyant. The market gapped higher on opening up $4.90 on market buying meeting with limited selling. The market quickly gained another $2.80 to hit the highs of the day. As the initial buying dried up prices dropped back as fast as they had rallied to hit the day’s lows 30 minutes later but failed to make much of a dent in the chart gap formed on the opening. The market then settled into a narrow $2 range for the rest of the session with much of the 3.2k lots traded in the first hour of the session. The HK slipped slightly to end at +18.80 while the KQ ended $1 firmer at +19.90.

India has produced 15.7 million tonnes of sugar between the beginning of October and the middle of January according to ISMA. This represents a 4% increase year on year. A total of 515 mills are operating 8 more than last year. However, the MD of the National Federation of Cooperative Sugar Factories Ltd has reported that total output may fall 4% to around 34.3 million tonnes due to adverse weather earlier in the year. Excessive rainfall and cloudy condition hampered the cane’s vegetative growth resulting in lower cane yields than last season. There has been some earlier chatter that yields in Maharashtra are lower than expected. Earlier in the season some Indian analysts have suggested production could fall by 7% compared with last season’s 36 million tonnes. Given production is running 4% above last year most analysts will not be lowering their forecasts too much for the time being but it would seem any increase over last season is unlikely.

This morning the market opened 11 points higher from Friday’s close before improving further. Currently, prices are 16 points higher. The HK is 6 points firmer at +138 while the KN is 4 points firmer at +77. In early London trading, the HK is firmer at +19.40 as is the KQ at +20.10. The macro is negative this morning with crude slightly lower and grains/soya lower while the USD Index is a tad firmer. The BRL weakened slightly yesterday to end at 5.174. The market looks set to remain firm with the structure improving again. Chatter that output in India will drop will add to the bullish sentiment as it may mean any further export quotas will be limited. The next up-side target is 20 cents and the double top at 20.02/20.04. This would seem likely to be tested and breached today. A small 2 point chart gap formed this morning is short term target.