Sugar Market Report for 20 May

Good morning,

The market corrected further yesterday as the threat of frost across Brazil’s CS subsided and Indian sugar production continues to grow. The market opened 7 points lower on a general negative macro picture and fell another 18 points before finding some support around 19.60. The market then calmed into a narrow 12 point trading range until US traders got to their desks when prices dropped to the lows of the day but found support at 19.50 which triggered more substantial short covering by the short term speculators which saw prices improve ultimately into the plus column and the highs of the day before slipping back to opening levels on the close. The NV ended 1 point weaker at -13 while the VH was a couple of points firmer at -21. The trading volume slumped to just over 84k lots. In London it was equally as quiet with the QV finishing slightly weaker at +15.00 while the VZ was unchanged at +4.70. The VV WP ended at 98.00 while the VZ was at 93.40 by the close. The cold weather threat, which was never of any great threat, has subsided which, unsurprisingly, saw coffee take a large tumble on Wednesday and had a lesser impact on sugar. It was probably more the case that a correction was needed after prices had rocketed 160 points in just three sessions.

India had produced 34.9 million tonnes of sugar by the 15th May according to ISMA. As of this date 405 mills had closed for the season while another 116 were still crushing (compared with just 45 mills still crushing this time last year). Most mills will cease operations by the end of this month but a few will continue until the middle of June. Additionally, Karnataka and Tamil Nadu have a special season that starts in June and may run through to September. Total production is usually around 436k tonnes which will add to the record production. Total production for the season now seems very likely to hit 36 million tonnes – some 5 million tonnes more than the 31 million predicted before the crush started. ISMA also reported that Indian mills have signed to a total of 8.5 million tonnes for export. Around 7.1 million tonnes have already been shipped since the beginning of the season including stocks accumulated during the 2020/21 season.

This morning the market opened 5 points firmer before pushing higher quickly breaching the highs of yesterday. Currently, prices are 15 points higher. Both NV and VH are 1 point firmer at -12 and -20 respectively. In early London trading the Qv is a little firmer at +15.50 while the VZ is also firmer at +5.10. The macro is mixed today with crude slightly lower while grains/soya are mixed. The USD Index is higher after the large tumble seen yesterday. The BRL ended around unchanged at 4.93 last night. It looks as if prices will remain firm and could push back towards the highs seen on Tuesday if the funds continue to increase their net longs. There would seem little reason for prices to push too much higher from a fundamental basis but while the uncertainty over Brazilian production remains prices will remain well supported.




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