Sugar Market Report for 6 May

Good morning,

Yesterday saw an inside day as the market consolidates after dropping to its lowest level since 18^th March the previous session. The market had opened12 points firmer on a positive macro picture after the US Fed raised US interest rates by 0.50% the previous evening. The market continued to improve adding another 7 points during the morning before hitting some resistance at 18.80. With crude falling back the market also corrected lower dropping back to near the recent lows. Support was, again, noted below 18.60 and this triggered a more aggressive bout of buying which took prices over 25 points higher during the last hour of trading to hit the day’s highs before slipping back slightly by settlement. However, the trading volume was a poor 90k lots as the market continued to trade within the range of the previous two sessions. The NV improved by 3 points to end at -13 while the VH was 1 point higher at -31. In London is was a very quiet session as the QV finished unchanged although the VZ was slightly higher at +2.60. The WP improved back to the levels seen late last week with VV WP finishing at 96.30 and the VZ WP at 93.70. The market is trying to find a bottom to the move which has seen prices drop from 20.50 over the past three weeks. However, the market is still shadowing the macro to a certain extent while fundamental news remains limited.

As mentioned in yesterday’s report the crush continues in India with total sugar production reaching 34.2 million tonnes by the end of April. It would now seem likely the harvest will not finish until June when the monsoon is likely to start. This means total production could, conceivably reach a mammoth 36 million tonnes. Talking of the monsoon the Indian Meteorological Department has reported that this year’s monsoon looks likely to be timely with a depression over the Andaman sea developing. Therefore, the monsoon is expected to arrive in Kerala at around the 1^st June and cover the rest of India by mid-July with 70% of the annual rainfall. Currently, forecasters expect rainfall to be mostly uniform in distribution. However, at this stage things can change and it will not be for many weeks a clearer picture will emerge as to whether the rains are good and uniform.

Brazil exported 1.33 million tonnes of sugar during April. This is just over 25% less than the 1.79 million tonnes exported in April 2021. The drop is in line with expectations after the low sugar production last season.

This morning the market opened 6 points firmer before immediately dropping back to unchanged before slipping into the negative column. Currently, prices are 7 points weaker. The NV and VH are unchanged at -13 and -31 respectively. In early London trading the QV is a tad firmer at +9.50 while the VZ is around unchanged at +2.60. This morning the macro is a negative picture although crude is 1% higher. The main reason is the strength of the USD. The USD index has made a new high of 104 its highest level since December 2002. This strength has seen the BRL weaken to 5.02 where it finished last night. The strength of the USD will weigh on most agricultural contract including sugar which suggests prices may drop back to the lows reached on Wednesday. Whether prices break lower will depend on whether the funds liquidate more longs. Good scale down buying from end users is still in place and likely to limit the downside. Equally, a significant improvement in prices would also seem unlikely while the USD remains so strong. Perhaps another inside day.