Sugar Market Report for 31 January

The market improved again yesterday hitting its highest level since the 6th February 2017 on continuing concerns over physical availability and an expected drop in Indian production. The market had opened 5 points higher but soon slipped lower. However, the early weakness was fleeting with prices soon recovering and back to unchanged by mid-morning. Prices soon reached the late December highs and, eventually, broke higher as a couple of small buy stops were triggered. As to be expected more selling was encountered above new highs and that did, ultimately, trigger some day trader liquidation which took prices marginally lower. Prices did recover going into settlement but ended some 12 points off the highs. Nevertheless, it was another strong close. Surprisingly, given the strength of the flat price the HK dropped 4 points to end at +131 while the KN gained 1 point to finish at +83. In London, the spot month continued to weaken against the rest of the board with the HK ending just under $1 lower at +8.00 while the KQ improved marginally to +17.20. This meant the WP also improved with the HH WP at 101.10 and the KK WP at 122.00. The market appears to know no bounds at the moment with the first settlement above 21 cents for nearly 6 years. The recent run up has surprised many as there seems little justification for prices at their current level. However, the bulls are, currently, in charge and the sellers are nervous.

Limited fresh fundamental news around. Traders are awaiting an update on Indian production which should start to falter given the view of lower over-all production. The Brazilian CS cane crop looks in excellent condition with soil moisture at multi-year highs. Continuous rain over the coming 10 days will ensure this remains the case. However, the amount of sugar produced will be down to ethanol production much of which will be dictated by the Government’s fuel policy going forward. Current demand for ethanol is muted. Prices have improved recently but are still going to be lower in January.

This morning the market opened 4 points firmer before falling back slightly. Currently, prices are 3 points firmer. The HK and KN are unchanged at +131 and +83 respectively. In early London trading, the HK is firmer at +8.50 while the KQ is, virtually, unchanged at +17.40. The macro is negative this morning with crude, grains/soya and metals lower while the USD Index is stronger. The market has taken little notice of the macro in recent sessions and that looks likely to continue. The market still looks firm and could improve further as there is still limited resistance above. However, the market is getting close to over-bought and maybe peaking technically.