Sugar Market Report for 3 November

Good morning,

Yesterday saw an inside day as early losses were erased by the close. The market had opened 2 points firmer but soon started to drop after it became apparent there was little in the way of follow-through buying after the firm close the previous session. Prices continued to slide for much of the session only finding some support below 18.20. Eventually, this triggered some short term short covering which saw prices rapidly improve with a couple of small buy stops seen at 18.30. The market finally settled in the plus column and near the highs of the day. The HK slipped 5 points to +99 on some light liquidation while the KN was also 5 points weaker at +53. In London the spot month weakened slightly with the ZH ending at +29.80 while the HK was a tad firmer at +9.40. The WP improved after dropping the previous session. The ZH ended over $3 firmer at 129.60 and the HH WP at 99.80. It was a positive market performance closing at the highs after clawing back all the earlier losses. There was limited fresh fundamental news so the market reacted to the higher crude market and the continuing lack of information regarding Indian exports for this season. Truckers in Brazil are persisting with the roadblocks in protest to the Presidential election result which saw Bolsonaro lose to Lula Da Silva. Bolsonaro requested late yesterday for the roadblocks to be lifted and for protest in other ways.

Czarnikow reported yesterday that they see sugar consumption in China dropping and is likely to consume less than 15 million tonnes in 2022 due to the pandemic and lower economic growth. The Covid lockdowns has seen severe restrictions on people’s movement in the larger cities. Consumption was last at this level in 2013. They see sugar production and imports falling by 2.1 million tonnes in 2022 compared with 2021. The result is that sugar stocks are also high. Imports of raw sugar fell to their lowest level since 2019 at around 4.5 million tonnes. Czarnikow predict imports may even be lower in 2023 at 4 million tonnes due to stocks remaining high. With global production expected to increase this season and global demand under pressure, the size of the surplus could grow from around the predicted 1.5 – 3 million tonne level.

This morning the market opened 12 points lower on a distinctly negative macro picture. Currently, prices have recovered slightly and are 6 points lower. The HK and KN are both 1 point firmer at +100 and +54 respectively. In early London trading, the ZH is firmer at +31.00 while the HK is a tad firmer at +9.80. As mentioned the macro is negative with most commodity markets lower due to a resurgent USD as the Fed increases US interest rate by 0.75% to 4% and warns of more rises to come. This is the highest level since early 2008. The USD Index is over 1% higher which is weighing on commodity prices. Sugar looks likely to weaken on the overall bearish macro picture. Nevertheless, the lack of information from India and concerns over Brazil’s CS production is likely to keep prices from falling too far.