Sugar Market Report for 8 March

Good morning,

Prices rocketed again yesterday as the prospect of the US and Europe banning Russian oil imports sent crude prices to their highest level since 2008. However, prices dropped back by the close. The market had opening 23 points higher opening a chart gap before surging another 30 points over the next 30 mins to hit the highs of the day. Prices remained firm forth rest of the morning but started to drop back in line with crude which saw a bout of liquidation. The market continued to weaken despite crude stabilising with the spot month falling into the negative column mid-afternoon. The market then remained under pressure for the rest of the session with prices eventually settling 5 points off the lows. The spot month weakened considerably against the rest of the board with the KN ending 13 points weaker at +13 while the NV also slipped by 6 points to -5. The back months remained strong which may suggest concerns about physical supply next season with the on-going Russian/Ukraine conflict. In London the KQ also eased to +12.50 while the QV also ended weaker at +9.10. However, with NY weakening the WP improved with the KK WP ending at 108.50 and the VV WP at 98.80. It was another volatile day across all markets with crude climbing to its highest level since July 2008 and wheat hitting its highest level since March 2008. Equity market dived while virtually all commodity market increased due the continuing Russian/Ukraine war which has caused immense uncertainty and thrown up so many concerns over supply and demand for commodities. The fall in sugar was not inspired by any particular news but was triggered as crude saw a slight correction and this led to a hefty bout of liquidation after the market had gained over 230 points in the space of five sessions.

Apart from the general buying across the commodity spectrum sugar has surged higher on expectations that Brazil will divert a large proportion of their sugar cane to ethanol production. It has been calculated that actual ethanol parity is now close to 21 cents against international crude prices. Currently, Brazil’s Petrobras has not increased their gasoline and diesel prices but an increase is thought to be imminent. However, the Government is keen not to stoke inflation so any increases are likely to be measured. There has also been chatter that the soaring grain prices may mean, longer term, that grain crops will be planted at the expense of sugar cane and beet – this scenario could be more acute for sugar beet which is an annual crop.

This morning the market opened 7 points weaker before immediately dropping another 18 points on long liquidation as crude prices fall back to around unchanged after surging 3% higher in earlier trading. Currently, prices 9-10 points lower after hitting 19.01 shortly after the opening. The KN is 1 point firmer at +14 while the NV is 3 points weaker at -8. In early London trading the KQ is firmer at +13.10 while the QV is unchanged at +9.10. The macro is still strong with most commodities higher although equities are slightly higher as well. The USD Index is weaker but still at its highest level since May 2020. The global market remain very volatile and nervous as uncertainty haunts the globe. Sugar looks likely to remain volatile with support at 19.00 cents and the highs of yesterday still well within reach. The funds have increased their net long position considerably over the past week but still have more ammunition if desired. There would appear little reason for the global market turmoil to subside in the short term and this may mean sugar traders start to sit on position having adjusted on the rally.