Sugar Market Report for 28 April

Another day and another 11 year high. Prices jumped yesterday in anticipation of a poor Unica number although settled well off these highs. The market had opened 3 points weaker before immediately dropping another 20 points to register the low of the day. However, once this early selling dried up prices soon recovered and continued to surge higher peaking just as the Unica report was released. Prices soon started to drop away losing over 70 points in the next hour – very much the case of buy the rumour sell the fact as, suspected, the Unica data was disappointing. Support was eventually found as prices approached 26.10 with prices bouncing 47 points before slipping back again. Further late speculative liquidation saw prices end some 48 points off the highs but still settling at contract highs. The KN dropped back losing 9 points to end at +64 with just one session to go until expiry of the K-23. The OI dropped to 26,635 lots with another 12,570 lots traded yesterday still suggesting a total delivery of just shy of 1 million tonnes. London saw a spectacular turnaround after the weakness of the previous session with the flat price jumping on, reportedly, good WP buying during the morning. The QV improved just over $3.50 to end at +13.50 while the VZ was $2 firmer at +12.50. The WP jumped with the VV WP $8 higher at 133.20 and the VZ WP nearly $6 firmer at 120.70. The bull market continues relentlessly with 9 consecutive higher highs being posted. The market has, so far, improved by 6 cents since the beginning of the month and there would seem no reason for the rally to peter out anytime soon although a correction is overdue.

Unica released its harvest report for the first half April yesterday afternoon. As expected it showed the harvest has got off the a very stuttering start due to rain hampering field operations. A total of 13.6 million tonnes of cane were crushed producing just 542k tonnes of sugar from a 38.6/61.40 sugar/ethanol split. This was slightly below expectations although no one will have been too surprised. Since the middle of April there has been more rain although not as disruptive and longer term it is starting to get drier which should allow the harvest to get into top gear.

Mexican sugar production may drop 10% from earlier estimates due to drought that hit the cane between October and April when rains arrived. It is now thought that total production will only reach 5.43 million tonnes from the previous estimate of 6.03 million tonnes. This is despite an additional 30k hectares being planted. High fertilizer prices have also had an impact.

This morning the market opened unchanged but soon improved. However, once the early buying subsided prices slipped back slightly. Currently, prices are back to opening level and unchanged. The KN is 2 points weaker at +62 while the NV is 1 point weaker at +33. In early London trading the QV is firmer at +16.10 while the VZ is around unchanged at +12.60. This morning the macro is mixed with crude slightly higher, grains higher and the USD Index up while the BRL was firmer yesterday at 4.97. The market remains very strong although a correction is on the cards. K-23 expiry today although fireworks are not expected with most having all positions in place to make or take delivery. It will be interesting to see how much hits the tape – will a million tonnes be seen as bearish given the current tightness in raws. Assuming the KN does not collapse a chart gap on the first month continuous chart will be formed to fill on Monday. It took a month for the chart gap to be filled after the H-23 expiry – it may well be swifter this time.

Please note London is closed on Monday for bank holiday so NY will open later at 12:30 (London time) with normal closing time