Sugar Market Report for 17 November

The market pushed higher yesterday to hit its highest level since 13th April although ended slightly weaker by the close. The market had opened 1 point weaker before dipping further and then improved to break above the previous day’s high. Prices then slipped back into the negative column but good support was found around 20.25. Another attempt to push higher allowed a new high to be hit mid-afternoon before prices slipped back on some speculative liquidation. The market then remained within a narrow 11 point range through to the close with the support at 20.25 holding with the market, eventually, settling slightly lower. The HK improved again hitting a new high before settling at +121. The KN ended 2 points weaker at +78. In London, it was a different story with flat price and structure weakening after the December expiry and the realisation that India is more likely to export whites than raws over the coming months. The HK slipped just over $2 to end at +7.50 while the KQ was also a tad lower at +18.00. This meant the WP took a tumble with the HH WP ending over $6 weaker at 97.70 while the KK WP was $2 lower at 117.00. The market paused for a breather yesterday after the huge 290 point move off the recent lows hit just 13 sessions ago. The main driver has been fund buying coupled with the growing view that physical supply will remain tight over the coming 4-5 months as most Indian exports of the 6 million tonne quota will be refined sugar and not raws.

London December contract expired on Tuesday with a total of 7,190 lots delivered official exchange data confirmed. All deliveries were from India with Kandla the main port. However, 104 lots were delivered from Mumbai for the first time. This surge in Indian deliveries against the tape looks likely to continue and probably grow over coming expiries and may, eventually, see more Indian mills delivering directly.

The large Indian delivery against London emphasises the current situation that most of the 6 million tonnes in the initial tranche of exports will be refined sugar so a tightness in raws is seen as growing and, hence, the recent surge in the NY market as primary importers such as Indonesia and Bangladesh need raws. The rally has been exaggerated by fund buying and issues with earlier defaults by Indian mills who had sold before the surge in prices. Whether the tightness will be as great as the market is suggesting remains to be seen. Some buyers will defer purchases until later next year while Indian mills may produce raw sugar for export if prices stay around current levels.

This morning the market gapped 16 points lower this morning before recovering slightly. The market is, currently, 16 points weaker. The HK is 4 points weaker at +117 while the KN is 2 points weaker at +76. In early London trading, the HK and KQ are unchanged at +7.50 and +18.00 respectively. The macro is mixed at the moment with crude a tad lower while grains/soya are also lower. The USD index is around unchanged while the BRL weakened to 5.39 last night. The fundamental picture notwithstanding the market remains over-bought so a correction is on the cards. The extent of any correction is difficult to gauge but the market does not look set to collapse at the moment. The funds may take a breather for the time being and possibly not add to longs unless the highs of revisited. The COT on Friday will make for interesting reading and may show the funds over 100k lots net long. In the very short term the chart gap formed this morning is likely to be filled. The chart gap well below the market between 18.00 and 18.05 is not likely for the time being but, it should be remembered, that sugar does like to fill its gaps.