Sugar Market Report for 2 November

Good morning,

The market jumped again yesterday as short covering and fresh buying took the spot month up to 18.50. The market had gapped 8 points higher on the opening and above 18.00 cents with some small buy stops triggered with the opening print the low of the day. The market continued to slowly improve throughout the session culminating in hitting the day’s highs shortly before the close when a bout of day-trader profit-taking took prices down 13 points. Nevertheless, it was a strong performance although, interestingly, the spot month premium actually ended 4 points weaker at +104. The KN also lost 2 points to settle at +58. In London the spot month took somewhat of a tumble losing nearly $5 to end at +30.50. The HK was also a tad weaker at +9.10. Consequently, the ZH WP dropped to 126.40 while the HH WP ended firmer at 95.90. The gains of yesterday appeared to be for several reasons. Firstly, the macro was positive with the USD weaker impacting on most commodities. Secondly, the lack of information from India regarding their export policy is beginning to concern traders as to what they will eventually decide. Finally, road blockages across Brazil set up by Bolsonaro supporters in protest of his election defeat, were seen as possibly impacting the movement of sugar. Additionally, there was a dearth of selling above the market.

There is little more to add regarding Indian exports. The market awaits the Government’s decision but their lack of information is beginning to concern traders that they may decide to a different approach than the expected 5-6 million tonnes of exports in their first tranche. In Brazil, the threat of transport disruption after roadblocks were set up by Bolsonaro supporters seems to have quickly receded as the Supreme court ordered police to remove the roadblocks. Bolsonaro had been silent regarding the election result until yesterday when he vowed to follow Brazil’s constitution but did not concede defeat. This suggests that he will not contest the result as some had feared.

Brazil exported 3.75 million tonnes of sugar during October which is just over 38% higher than the 2.31 million tonnes exported in October 2021.

This morning the market opened 2 points firmer where it, currently, remains. The HK is 1 point firmer at +105 while the KN is unchanged at +58. In early London trading, the ZH is firmer at +32.00 as is the HK at +9.90. This morning the macro is mixed with crude firmer, grains/soya mixed and the USD Index is lower after the volatility of the past few sessions when it pulled off one-month lows. The market looks likely to remain firm and could improve further while the Indian Government remain silent. Nevertheless, assuming they allow, at least, 5 million tonnes there would seem little reason for prices to improve much more. Equally, it is unlikely prices will immediately collapse as there are still concerns over total sugar output from Brazil’s CS. However, with the upcoming harvests in India and Thailand boding well there would seem little concerns over supply later next year.