Sugar Market Report for 24 February

The market improved yesterday although the spot month continued to weaken against the rest of the board. The market had opened 10 points firmer but, as has been the case recently, dropped back to hit the lows within an hour of the opening. However, the support seen the previous session just below 19.90 was still in place and this encouraged some fresh buying which soon had prices moving higher. By the time US traders got to their desks prices were back at the highs of the previous session. Another aggressive bout of buying at the same time as the two previous sessions took prices higher causing a break out of the recent narrowing range. Prices did dip back as seen previously but, this time, the buying returned to take prices up to the highs of the day on the close. Some late day-trader liquidation was seen during settlement but recovered in the post-settlement period. While the flat price was improving the HK was weakening losing another 15 points on the day to end at +124 having now lost nearly 50 points from the high hit last week. However, the KN improved gaining 8 points to end at +53. In London it was quieter. The KQ was virtually unchanged at +16.00 while the QV was slightly firmer ending at +13.50. This meant the KK WP finished weaker at 126.30 while the VV WP was unchanged at 112.20. The double bottom formed at 19.87/88 during the morning set the market up to test the up-side resistance. For the third session in a raw a good bout of speculative buying during the early afternoon took prices through the double top at 20.28 which triggered further buying aided by the additional buying caused by the good HK selling. The H-23 OI dropped to 53,754 lots with another 49,717 lots traded yesterday.

Next week the good and great of the sugar industry will meet in Dubai for the annual sugar conference. It promises to be very well attended now the world is fully open post-pandemic. Whether yesterday’s improvement can be classed as a pre-conference rally remains to be seen but there is likely to be much discussion on India and Brazilian production.

Fitch solutions, part of the credit rating agency, reported yesterday that they see raw sugar prices averaging 2% higher in 2023 compared with last year at 19.00 cents. They see production dropping in India and Europe while Chinese demand should recover. However, they see total Brazilian production reaching 38.10 million tonnes some 7.6% increase on the previous year and the main reason prices may drop back from their current levels.

The opening saw the H-23 open 12 points firmer on some decent market on opening buying while the K-23 opening 6 points higher. Currently, the K-23 is unchanged. The HK is 11 points firmer at +135 while the KN is 2 points better at +55. In early London trading the KQ and QV are both unchanged at +16 and +13.50 respectively. This morning the macro is a positive picture with crude higher along with grains/soya although the USD Index is also slightly firmer. The BRL was also a tad firmer last night finishing at 5.132. The market continues to look firm with 3 trading sessions until H-23 expiry. The early strengthening of the HK suggests it may not weaken too much more and may bring in more sugar to the tape. The up-side target is 20.52 the high reached last week with good support now seen below 20 cents. However, it is likely the funds remain heavily long and may not increase much more. The CFTC has announced COT reports will start to be released tonight but will start with the report from 3rd February. Subsequent reports will then be released in a timely manner but no official schedule has been published yet.