Sugar Market Report for 27 October

Good morning,

Prices improved again yesterday in part due to bullish Unica data and a positive macro picture. The market has now regained most of the losses of last week and is now back in the range seen sine the beginning of September. However, the trading volumes remain very subdued at just under 76k lots. The market opened a couple of points lower and then quickly settled into a narrow 11 point range until just before the release of the Unica data when prices started to improve. Further gain were seen after its publication with prices gaining another 25 point points to hit the highs of the day mid-afternoon. Prices then remained at the higher levels for the remainder of the session settling at its highest level since 15^th October. The HK ended the session unchanged at +40 while the KN was 4 points firmer at +33. In London the ZH was a tad lower at +6.70 while the HK improved to +1.00. This saw the WP end around unchanged with the HH WP at 71.20 and the KK WP at 79.00. The Unica data which showed a marked drop in the crush and sugar production more than had been expected. However, somewhat ironically, the main reason for the drop was the rain that fell during the period that hampered and delayed field work.

Unica data for 1^st half of October showed a crush of 19.68 million tonnes producing 1.14 million tonnes of sugar both somewhat below expectations. The spilt ( 39.11/60.89) also move more in favour of ethanol as prices improve. Agricultural yields continue to lag well behind last season at 69.6 m/t per hectare (April to September) vs 82.4 m/t last year. It now looks as if total sugar production will be around 32 million tonnes down 6 million from last season.

Datagro reported yesterday they see a marginal recovery on the next Brazilian cane crop due to better rains over the past few weeks. They see a cane crop of between 530 and 565 million tonnes producing between 31.6 and 33.7 million tonnes versus 31.9 million tonne expectation for the current season. They expect mills to increase crop care as the rains improve soil moisture and cane development conditions. More rain is forecast over the next 10 days at least.

This morning the market opened 6 points lower this morning before slipping another 6 points mainly on the back of a weaker macro picture. Currently prices are around 6 points weaker. The HK and KN are a tad weaker at +39 and +31 respectively. In early London trading the ZH is a tad firmer at +7.20 as is the HK valued around +1.50. The macro as mentioned is negative this morning with energy down and most agricultural contracts lower as well as metals. The USD index is also slightly weaker. Despite bullish Unica data the market continues to react to the macro. Nevertheless, it would seem unlikely prices will collapse and may improve during the session. However, a return to the highs of over 20.50 would seem unlikely for the time being.