Sugar Market Report for 28 April

Good morning,

Yesterday saw a correction to fill the chart gap formed on Monday’s opening before prices fell back to around unchanged by the close. The market had opened unchanged but soon dropped on weak macro and surging USD. The lows of the previous session were soon breached with prices hit day’s lows soon after and their lowest level since 18^th March. However, the selling quickly dried up and a decent correction was seen with prices improving 40 points over the next couple of hours culminating in the chart gap being filled. Prices improved another 10 points to hit the day’s highs by early afternoon. The short covering eventually dried up with prices gradually dropping back during the rest of the session to settle either side of unchanged with KN improving by 6 points to end at +12 with just two trading session before expiry. The OI in K-22 dropped to 31,107 lots with another19,436 lots traded yesterday which continues to suggest a relatively small delivery perhaps around the same size as last year when 576,631 tonnes were delivered and well below the record May delivery seen in 2020 when 2.258 million tonnes were delivered. The NV improved by 1 point to settle at -8. In London the QV ended a tad firmer at +7.60 while the VZ was slightly lower at +3.60. However, the WP improved with the VV WP ending at 97.40 and the VZ WP at 93.80. It was a fairly non-descript day as the market continues to consolidate at around the 19 cent level. The filling of the chart gap and the subsequent drop back to unchanged will not be seen as particularly positive. The strengthening of the front spread suggests the receivers have got their positions in place with last of the shorts needing to cover.

Brazilian Government agency Conab reported yesterday they see total sugar production for Brazil (both CS and NE) at 40.28 million tonnes which would be 15% higher than last season. This would be from 596 million tonnes of cane which is just a 1.9% increase from the 2021/22 season. They believe a much largest percentage of cane will go to sugar production instead of ethanol which flies against many analysts who expect either the same or slightly more cane to go to ethanol production. Conab suggest more cane to sugar because many mills have concluded export contracts for the season and need to produce sugar to fulfil commitments. Time will tell if this is the case. Unica should release their 1^st half April data either tomorrow or Monday. It is unlikely to give too many clues as to where the cane will be allocated as it has been a slow start to the harvest.

This morning the market opened unchanged before improving 5 points. Currently, prices are 3-5 points firmer. The KN is 2 points firmer at +14 while the NV is 1 point better at -7. In early London trading the QV and VZ are virtually unchanged at +7.50 and +3.50 respectively. This morning the macro is a slightly negative picture with crude and grains/soya slightly lower. However, the USD Index very firm again and is getting close to challenging the high seen back in March 2020. The strength of the USD would seem to main reason for pressure on commodities and is likely to keep a cap on any rises in sugar. However, at current levels there is a lack of selling or buying interest. The producer selling has been left well above the market while end-users will be looking and hoping for lower levels before pricing more. Therefore, direction will probably be dictated by the macro in the short term with the market remaining within 18.50 to 19.50 for the time being.