Sugar Market Report for 8 November

Good morning,

The market recovered from an early tumble after the Indian Government announced that they would allow 6 million tonnes of exports. The market had opened 21 points lower on the weekend news before immediately dropping another 12 points to hit the lows of the day. However, after holding near these lows the market started to slowly recover as speculative shorts covered their earlier sales and some fresh buying was noted. Prices, eventually, topped out at near the highs of Friday’s session before falling back by the close to end marginally lower on the day. The HK gained a couple of points to end at +96 while the KN was up 4 points at +58. In London, the spot month continued to weaken against the rest of the board as the expiry comes into view. The ZH dropped over $6 to end at +20.10 while the HK was also weaker at +6.90. This meant the WP ended weaker with the ZH WP at 119.00 and the HH WP at 99.00. After the weeks of waiting for an announcement from the Indian Government regarding exports, it was all a bit of an anti-climax with a limited response mainly because it was as expected. Attention now turns to Brazil’s CS as to whether the production will better last season’s 32 million tonnes. Unica should release harvest data for second half of October later this week.

As mentioned above the Indian Government made their long awaiting announcement regarding their export policy for the current 2022/23 season. 6 million tonnes will be allowed. While no official mention of a second tranche of exports it is widely expected another 2-3 million tonnes will be allowed later in the season. This first tranche should be exported by the end of May. Several export deals have been already contracted in anticipation of the Government’s announcement with sugar going to Asia, Africa and the Middle East. Exporters will be keen to get all 6 million tonnes sold and exported before the next Brazilian harvest gets into top gear.

According to the consultancy Safras & Mercado Brazil’s next CS cane crop should reach 565 million tonnes in 2023/24 compared with their projection of 545 million tonnes for the current season. Good soil moisture levels should be preserved going into November and December and help crop development before the next harvest starts in April next year. They see total Brazilian crush at 620.7 million tonnes producing 39.04 million tonnes with exports at 35 million tonnes. They also expect 49% of cane to go to sugar production as it continues to give better returns than ethanol.

This morning the market opened 2 points firmer but soon fell away. Currently, prices are 5 points weaker. The HK and KN are unchanged at +96 and +58 respectively. In early London trading, the ZH is slightly weaker at +20.00 while the HK is firmer at +7.80. This morning the macro is mixed with crude slightly weaker, grains/soya slightly higher and the USD Index stronger after the weakness of the past two days. The market is showing more resilience than many had expected once the Indian news had been announced but the expected physical tightness had taken into account Indian exports so it was unlikely the market would collapse. Nevertheless, there would also seem little reason for prices to improve significantly from current levels and may slip slowly lower.