Sugar Market Report for 3 May

The market ended lower again yesterday as the correction off 11 year highs continues. The market had opened 4 points weaker but soon started to recover as follow-through selling, after the previous session’s weak close, was limited. Prices continued to improve throughout the morning before peaking as US traders got to their desks. Prices then made a solid turnaround with prices diving over 60 points in 40 minutes as the macro turned decisively negative with crude slumping over 4% on broad economic concerns and, potential, lack of demand from China. Some support was, initially, found at 25.00 cents but, eventually, broke lower. Prices did improve marginally before a bout of market on close selling took prices down to the lows of the day and some 130 points off the highs reached last week. The NV improved a couple of points to +31 while the VH slipped 2 points to +38. In London, which had been closed the previous session, slumped as it caught up with the losses in NY on Monday. The QV improved to end at +12.60 as did the VZ which ended at +10.50. This meant the VV WP was barely changed from Friday at 133.60 while the VZ WP was firmer at 123.10. The market did recover well during the morning but the macro then intervened pressurising most commodities. However, the correction in sugar was to be expected after the very strong rally seen at the end of March when there was very little pull back. The fundamental picture has not changed although there is still a lot of premium in the price for what might happen.

StoneX reduced their expected surplus for the current season to 1.1 million tonnes a drop of 1.4 million tonnes due to lower production from India, Mexico and the EU. They see another small surplus for 2023/24 of 1.3 million tonnes. They now see Indian production for this season at 32.8 million tonnes and even lower for 32.5 million tonnes in 2023/24 due to lower planted area and more cane being used for ethanol production. While they see El Nino developing and maybe impacting on soil moisture across Asia it is unlikely to effect Brazil’s production too much. They now see Brazil’s CS production at 37.20 million tonnes for the just started harvest compared with their last estimate of 36.8 million tonnes.

Brazilian sugar exports for April were down over 26% compared with April 2022. 971,592 tonnes were exported vs 1.316 million tonnes same time last year which is more a consequence of the lower than anticipated start to this season’s crush.

This morning the market opened 6 points lower and a new low for the move. Currently, prices are 4 points lower. The NV and VH are both 1 points firmer at +32 and +39 respectively. In early London trading the QV is firmer at +12.90 while the VZ is also a tad firmer at +10.80. This morning the macro is mixed after the negativity of yesterday. Crude is only marginally lower after the big drop yesterday which saw all the gains on the back of the OPEC production cuts at the beginning of April wiped out. The USD Index is weaker while the BRL ended at 5.04 last night. The market looks reasonable supported from 25.00 cents and below so downside looks limited unless the funds decide to liquidate the majority of their positions which would seem unlikely for the time being. Production from Brazil is going to be crucial over the coming months and any suggestion that it may not hit expectations will see prices improve.