Sugar Market Report for 19 January

Good morning,

The market gapped higher yesterday to hit its highest level in two weeks on a strengthening crude quote. The market gapped 13 points on its opening starting 19 points firmer as NY sought to catch up London which had improved nearly $6 the previous session when NY was closed. The market continued to improve adding another 22 points by mid-morning. The market then stopped for a breather before improving further as NY traders got to their desks. The market then remained firm through to the close hitting the day’s highs just shy of 180 points off the lows of the previous week. The action was mainly short covering meeting with limited scale up trade selling. The HK only improved by 1 points to end at +24 while the KN finished 5 points firmer at +22. In London the structure eased slightly with the HK ending at +10.00 while the KQ ended $1.70 weaker at +8.60. This meant the WP eased slightly lower as well as the HH WP ended at 97.70 and the KK WP at 93.00. Yesterday’s jump higher was triggered by crude’s strength as geopolitical concerns and tight supply combined to push prices to their highest level since 2014. Many analysts see crude continuing to improve which could have a significant bearing on how much cane Brazilian mills divert from sugar production to ethanol production when the 2022/23 season starts in April.

The Thai sugar cane harvest continues apace. As of the 16^th January the cane crush had reached 32.3 million tonnes just over 35% higher year on year. Total sugar production reached 3.2 million tonnes (raws 2.55 million tonnes and whites 531k tonnes and molasses making up the balance) which is just under 35% higher than same time last season. While the general consensus is that total cane crush will be between 85-93 million tonnes some analysts are thinking their estimates may need to be increased but may wait another few weeks. A couple of outliers are thinking that 100 million tonnes might not be impossible.

This morning the market opened 9 points firmer on follow through buying after the strong performance yesterday. Prices continued to improve swiftly breaking above yesterday’s high. Currently, prices are 14 points firmer. The HK is 3 points better at +27 while KN is 4 points firmer at +26. In early London trading the HK is virtually unchanged at +9.90 while the KQ is firmer at +9.20. This morning the macro is a positive picture with virtually all commodities higher. The USD Index is slightly weaker while the BRL ended yesterday a tad weaker at 5.56. While the macro continues to improve sugar is likely to follow. There is a chart gap below (18.37 – 18.45) but that is probably not a target for today. If the funds that sold afresh over the past fortnight decide to cover and also reinstate some longs then prices could improve significantly as it is unlikely too much producer selling will be encountered until prices get well above 19 cents.