Sugar Market Report for 22 March

The market improved yesterday after the macro brakes were released as more positive view was taken on the global economic situation following the purchase of Credit Suisse by UBS. The market had opened 12 points higher but once the early market on opening buying dried up prices slipped lower reaching the lows of the day by mid-morning. As the macro improved so did the market once support just below 20.50 was established meaning prices remained in the plus column. As US traders got to their desks prices start to rapidly improve gaining 35 points over the next three hours before some more concentrated selling emerged just below 21 cents. Prices dipped back on speculative liquidation before a bounce was seen on the close which saw prices improve 10 points. However, the trading volume was poor at just over 76.7k lots suggesting most traders are still sitting on their hands as the wait for the dust to settle across the broader macro picture. The KN improved 3 points to +52 while the NV was 2 points firmer at +26. In London the spreads also firmed with the KQ $1.40 firmer at +15.10 with the QV slightly firmer at +14.90. This meant the WP also improved with the KK WP finishing at 131.20 and the VV WP at 118.40. It was probably inevitable that prices would improve once the macro turned positive with the underlying positive fundamental picture and limited selling resting above the market. The final output from India and Thailand is still to be determined but will be lower than earlier prospects. Now all eyes turn to Brazil with the CS harvest just about to start. Expectations are high with the cane looking in excellent condition. However, are hopes too high? Unless the harvest gets off to a cracking start some doubts may start to creep in.

The CFTC released the last delayed COT report last night for the 14th March. They are now up to date with a normal release on Friday. The report showed the funds/specs cut their net long position by 18,823 to 181,702. This cut was seen during a period when the market hit new contract highs but ended over 60 points off these highs as the macro turned decidedly negative. The non-commercials cut their net longs by 17,735 to 134,044. This total is rather less than some had expected with the funds never reaching the levels of expectation some had predicted during the Dubai sugar conference. Nevertheless, the speculative level is high compared with the OI in K-23 where most of the positions are held. The commercials cut their net short position by 22,895 to 372,801 with trade covering shorts and some evidence of end user pricing. The Index funds cut their net longs by 4,072 to 191,099.

Farmers in Ukraine have started planting sugar beet as the weather is favourable. The country’s agricultural ministry expects the 2023 beet sowing area to rise to 220k hectares from 180k hectares last year. This could mean beet output rising nearly 15% to 11.3 million tonnes.

This morning the market opened 5 points firmer before falling back. However, they have improved after London opened and are, currently, 7 higher. The KN and NV are both 2 points firmer at +54 and +28 respectively. In early London trading the KQ is $1 firmer at +16.10 while the QV is at +15.60. The macro is slightly negative this morning with crude and grains/soya lower while the USD Index is unchanged as was the BRL at 5.24. The market remains range bound albeit at exalted levels. Selling build towards 21 cents while support is seen below 20.50. Traders remain very cautious of the wider macro so the market looks likely to remain within this range for the time being unless the macro dictates otherwise.