Sugar Market Report for 18 January

The market pushed higher yesterday settling at its highest level since 29th December. Having been closed on Monday the market was due 20 points higher after London improved on Monday. In the event, the market opened 11 points firmer before slipping back putting the lows of the day in place as support appeared around 19.70. This triggered some short covering and fresh buying which saw prices improve over the rest of the session with some fund selling meeting with limited and scale up selling. The HK improved 4 points to +136 while the KN ended 2 points higher at +75. In London the HK improved slightly to +19.30 while the KQ was a $1 firmer at +20.90. This ensured the WP also improved with the HH WP ending at 116.90 and the KK WP at 127.60. It was somewhat inevitable that the market would improve given the strength of London the previous session and chatter that Indian production could drop by 4% due to lower yields. The bulls are still in charge making the seller nervous. The spot month premium looks unlikely to weaken and this is adding to the positive sentiment.

India has contracted to export about 5.6 million tonnes of sugar according to the trade. This is against the 6 million tonnes of export quota allowed by the Government. It is thought about 2.5 million tonnes has been shipped. This means that India is not in a position to contract to export any more sugar until the Government decides on to allow a further tranche of exports. It is thought they may allow another 3 million tonnes once they have assessed production prospects and local demand. There has been a lot of conjecture on total Indian production. Some trade houses are of the opinion that production could fall to 33/34 million tonnes while others are sticking to 36 million tonnes unchanged from last season. It would seem ISMA is also of the view that the total will reach last season’s total. Some have also pointed out that domestic prices are lower at the moment than this time last year which is a good indication that there appears to be ample supply.

The Thai harvest is in top gear and around 1/3 completed. As of the 16th January a total of 33.4 million tonnes of cane had been cut, up 3.4% year on year. Total sugar production has reached 3.5 million tonnes an increase of 9.5% compared to this time last year due, in part, to a 5% increase in sugar yield. Before the season started the expected total production was around 11 million tonnes. Currently, many see production closer to 12 million tonnes.

This morning the market opened 5 points lower but quickly improved. The market is currently 8 points firmer. The HK is 2 points firmer at +138 while the KN is 1 point firmer at +76. In early London trading the HK is slightly weaker at +18.80 and the KQ at +20.50. This morning the macro is positive with crude and most other commodities higher while the USD index is lower and near 7 month lows. The BRL was around unchanged at 5.10. The market looks very firm and likely to improve further with limited selling above the market. The structure also looks set to improve further adding to the bullish mix. The next up-side target is the double top at 20.43/44.