Sugar Market Report for 20 October

Good morning,

The market slipped lower again yesterday but managed to regain most of the losses as good scale down buying noted from 18.50. However, London weakened again with the structure and white premium. The market had opened 6 points firmer but this soon became the high of the day as prices quickly fell away before some light support found around 18.55. This saw prices improve slightly but they soon dropped away before more scale down buying slowed the decent around 18.50. A small sell-stop at 18.48 took prices down to the lows of the day and their lowest level is 6 sessions before the market swiftly recovered gaining 23 points from the lows. Some late day-trader liquidation ensured prices closed in the negative column but the losses were in the end limited. The HK gained 2 points to end at +91 while the KN lost another 3 points to close at +46 its weakest since 6th October. In London the sell-off in the front month continued with the ZH losing another $2.60 to end at +33.80 its lowest level since 22nd October and over $18 off the highs hit last week. The HK ended virtually unchanged at +10.30. This meant the WP saw another large drop with the ZH WP ending $8 lower at 127.60 while the HH WP was also weaker at 93.80. There does not seem to be one particular reason for the sudden weakness in London and could quickly reverse. However, there maybe a growing view that the amount of refined sugar soon to be available will adequately satisfy demand as India starts its 2022/23 harvest. The raws market recovered reasonably well but much was down to an improving macro but also because good scale down buying was noted below 18.50. Many traders are unsure of direction with prices threatening to fall back but still remaining less than 30 points below the recent two-month highs.

Tereos announced yesterday it was raising its purchase prices for sugar beet. In a letter to farmers, they confirmed that for the 2022 harvest they would pay 41.85 euros per tonne for sugar beet on a sugar content of 16 degrees. This is a near 20% increase in prices from 2021. The increase is in response to the significantly higher selling price across the EU which is around 3 times higher than in 2021. Tereos also sees expected beet yields down on last season but close to the five-year average with an average sugar content of 18.2%.

This morning the market opened 1 point lower before falling further. Currently, the market is 2 points weaker. The HK and KN are both unchanged at +91 and +46 respectively, In early London trading the ZH is weaker again at +32.70 while the HK is also weaker at +9.70. This morning the macro is a positive picture with most commodities trending higher. The USD Index a slightly lower while the BRL ended slightly weaker but within its recent range at 5.28. It is difficult to see the market breaking out of its recent range for the time being with resistance above 18.90 and support below 18.50. However, the downside looks more likely to be tested again as London weakens. The silence from the Indian government regarding their export policy is also frustrating traders. Any announcement maybe now not be until after Diwali which means sometime next week.