Sugar Market Report for 7 December

The market ended weaker yesterday after failing to hold on to earlier gains as crude took a tumble and Brazil’s Petrobras cut their refinery prices. The market had opened 1 point weaker before recovering slightly. However, prices dropped back as US traders got to their desks and crude slipped. The market did recover to hit the highs of the day mid-afternoon but with the macro turning negative prices tumbled going into the close to end just of the day’s lows and at their lowest level in five sessions. The HK lost 3 points to end at +112 on some light profit-taking while the KN was also 3 points weaker at +65. Trading volume was limited at just under 80k lots. In London, the HK slipped to +12.30 while the KQ was also weaker at +17.00. There was limited action on the WP with HH WP dropping slightly to 107.40 while the KK WP was virtually unchanged at 119.60. It was another day of consolidation while the market, ultimately, ending lower mainly due to the macro.

Brazilian state-run oil company Petrobras announced yesterday that it was lowering diesel and gasoline prices at its refineries. Average diesel prices have been cut by 8% and gasoline prices by 6%.

Rain across Brazil’s CS region is causing most mills to end crushing for the season leaving millions of tonnes of cane in the fields which will now be harvested next season with an early start to the season in March according to local analysts and traders. The rain has been pretty constant since the middle of November and there are no dry spells seen for the next 10 days. Total production is likely to have crept over last year’s total of 32 million tonnes but would now seem unlikely to increase much more. Needless to say, the rains will be seen as very beneficial for the next cane crop as it continues to recover from the drought of 2021. This news suggests the large H-23 premium will continue and may even increase slightly.

This morning the market opened 6 points firmer. Currently, the market is 4 points higher. The HK is 1 point weaker at +110 while the KN is unchanged at +62. In early London trading, the HK is a tad firmer at +12.70 while the KQ is slightly lower at +16.80. The macro is mixed this morning with crude unchanged while most other commodities are mixed. The USD index is also unchanged while the BRL was also unchanged last night at 5.27. The news that Brazilian CS mills are packing up for the season is, to a certain extent, in the market. Some will struggle on is some regions taking advantage of the odd dry period. However, for most, it will not make economic sense despite cane standing in the fields and prices high. At the moment the large fund position is weighing on the market now prices are over 100 points down from the highs. It is estimated by some that their average buy price is around 19.05 which was the recent low. Some may lessen their position if prices break 19 cents. Nevertheless, while the flat price may come under further pressure the structure looks likely to remain firm.