Sugar Market Report for 4 November

Good morning,

Yesterday saw another inside day with prices ending unchanged after recovering from an earlier drop on the negative macro picture. The market opened 12 points lower as the USD surged after the US Fed increased interest rates and suggested more are likely. However, the early market weakness soon improved with prices pushing back to the previous close. The market then held in a relatively narrow range until US traders got to their desks when prices started to weaken again dropping nearly 30 points from the highs. Against support showed up at 18.20 which soon initiated a short covering rally which saw prices regain all the losses on the day to settle unchanged before gaining a couple of points during the post-settlement period. The HK and KN ended unchanged at +99 and +53 respectively. The trading volume slumped to just over 88.6k lots In London the structure remained firm with only a minor slip in the ZH which finished at +29.50. The KN was a bit weaker at +8.30. This meant the WP weakened slightly with the ZH WP ending at 128.70 and the HH WP at 99.20. It was another positive performance given the negativity of other markets. The chart gap formed on Tuesday remains unfilled while there is a triple top formed at 18.50/18.49. The market continues to await Indian Government news on their export policy (yawn) which may or may not be announced imminently.

There is limited fresh fundamental news around. The weather across Brazil’s CS is becoming dry for the next few days which will allow more crushing for the remaining cane. Unica should release their harvest data for the second half of October next week which should show production catching up with last year’s total of 32 million tonnes.

Indonesia is one of the largest importers of sugar but plans to change the situation over the next 5 years according to President Joko Widodo. He said if another 700k hectares could be put to cane the country could become self-sufficient in sugar in the next five years. This would be a huge 4 times increase in the current planted area of 180k hectares and would seem pretty ambitious. Nevertheless, any sizable increase in sugar production would see imports drop which would have an impact on other producers. The plans also see ethanol production being increased once the required sugar production is reached. Currently, Indonesia uses a mix of palm oil-based biofuel in its diesel being the biggest palm oil producer in the world.

This morning the market opened 3 points firmer and above the triple top formed over the past three sessions. This triggered some further buying which saw prices gain another 9 points. Currently, prices are 15 points firmer. The HK is 3 points firmer at +102 while the KN is 2 point firmer at +55. In early London trading, the ZH is unchanged at +29.50 while the HK is a tad firmer at +8.80. The macro is a positive picture this morning recovering from yesterday’s negativity. Most commodities are firmer while the USD Index is weaker. The BRL ended slightly firmer again yesterday at 5.12. The market remains firm mainly on uncertainty regarding Indian exports and the amount of sugar Brazil’s CS might eventually produce. Prices seem likely to improve further and could head back towards 19 cents. The downside looks limited after good support seen at 18.20 and below.