Sugar Market Report for 8 September

An attempt to break higher yesterday quickly fizzled out although the market did settle in the plus column but well off the highs. The market had opened unchanged before stating to improve. The morning saw a steady rise in price soon breaking above 18 cents. As US traders got to their desk the gain accelerated before finding resistance at Friday’s high. This triggered some day-trader liquidation before another attempt to break higher was seen. Again, traction failed to build and a more aggressive liquidation was seen that took prices down to just below 18 cents. Post-settlement buying saw the market gain 5 points from the settlement price. The VH improved a couple of points to +23 while the HK was 1 point firmer at +54. In London the spot month saw prices drop back on profit taking. The VZ ended $2 lower at +39.10 while the ZH was slightly firmer at +27.10. The OI in V2 dropped to 20,563 lots with another 9,239 lots traded yesterday. Unsurprisingly, it looks as if it will be a small delivery. The WP remains very firm with VV WP at 173.30 and the VZ at 134.20. However, the WP drops in value next year with the view that the market will adjust its white sugar output. The HH WP is valued at around 112.00 which is still good value for most refiners. The heavy drop in crude weighed on sugar yesterday but it still found decent support below 18 cents with the spot month at a premium to the rest of the board adding additional support.

The analyst CovrigAnalytics expects the EU to see a shortfall of 785k tonnes of white sugar for 2022/23 due to processing plants starting beet processing earlier than normal due to concerns over the availability of gas during the winter and dry hot weather that impacted the crop. They said that while many plants had converted back to oil from gas about 35% remain gas powered with concerns that gas supplies maybe compromised during the winter especially in Germany.

Despite the Russian invasion Ukrainian farmers sowed 180k hectares of sugar beet in 2022. This is expected to see production of around 1.1 million tonnes of white sugar which will cover all domestic consumption according to the deputy agricultural minister. This would be a drop of around 15% from the 1.3 million tonnes produced last year.

Czarnikow reported on Tuesday that they see a global sugar surplus of 3.00 million tonnes in 2022/23. They see total production at 180.2 million tonnes with consumption reaching 177.3 million tonnes. They see Brazilian CS production reaching 32.5 million tonnes which is around 1 million tonnes less than some other estimates. They are also not so optimistic regarding Thai production. They have lowered their estimate from 11.3 million tonnes to 10.8 million tonnes citing drier than expected weather and a high level of weeds in the fields.

This morning the market opened unchanged before immediately gaining another 10 points. However, it was not long before this early buying dried up and prices dropped back. Currently, the market is just 1 point firmer. The VH is 1 point firmer at +24 while the HK is unchanged at +54. In early London trading the VZ is a tad firmer at +40.00 while the ZH is slightly lower at +26.60. The macro is a positive picture this morning with most commodities trending higher while the USD Index is slightly lower after hitting another 20 year high yesterday which saw the BRL weaken yesterday ending at 5.25. The market appears to be content to remain within the range seen over the past three weeks. However, support appears to be good below 18 cents and with the spot month seeing a growing premium and the strength in London a break out of the range maybe on the up-side assuming the macro does not deteriorate.