Sugar Market Report for 21 February

Yesterday was, as to be expected, quiet with NY closed for National holiday. London opened $1.40 higher and immediately improved further gaining nearly another $5 over the next 40 minutes on market buying meeting with limited scale up selling. However, once this early buying dried up prices soon started to slip back to around opening levels. The market then became becalmed with little trading volume for the rest of the morning. The market awoke again mid-afternoon as some light selling took prices lower and momentarily into the negative column. The market soon recovered remaining around opening levels through to the early close ending just under $2 higher on the day. The KQ improved to finish at +18.60 while the QV was also firmer at +15.00.

ISMA reported yesterday that India has produced 25.4 million tonnes of sugar by the middle of February. This is an increase of 5.4% year on year. However, many are now warning that overall production could drop as much as 8% due to the cane maturing early and losing weight due to weather conditions in Maharashtra and Karnataka. Alvean are pegging production now at 33.5 million tonnes while other trade houses see production, perhaps, even lower. Whatever the final production figure any further exports would now look exceptionally unlikely something the market has been aware of for some weeks.

Egypt’s supply ministry announced yesterday that the country’s strategic reserves are sufficient to meet supply for more than three months. It was also announced that Egypt can now produce 90% of its consumption needs due to the production expansion of the Canal project. Assuming production will increase further over the next few seasons it is likely the country will be totally sufficient before long.

This morning the market opened 10 points higher but immediately dropped back 6 points. However, prices have now recovered back to their opening levels and are 10 points firmer. The HK did lose 5 points in early trading but has recovered and now 1 point lower at +160. The KN is a couple of points firmer at +50. In early London trading the KQ is slightly firmer at +18.80 while the QV is a tad weaker at +14.50. The macro is mixed this morning with crude slightly higher while grains/soya are mixed. The USD index is firmer while the BRL ended at 5.16 yesterday. The market looks set to remain firm as the H-23 enters its last full week of trading before expiry. The OI stands at 75,924 as of COB 17th February with another 47,569 lots traded on Friday. The market remains firm and shows no sign of dropping too far. Good support seen at 19.60 with triple bottom at 19.61/62. If this level is broken it may trigger some long liquidation but scale down buying should stop any wholesale drop. Chatter that Indian production will drop rapidly over the remainder of the season remains the most supportive fundamental factor.