Sugar Market Report for 25 April

Good morning,

The market took a battering on Friday losing over 60 points to settle at its lowest level since the end of March and over 125 points off the highs reached just over a week earlier. The market had opened 7-8 points weaker before dropping further before some support was found near the lows of the previous two sessions. However, as US traders got to their desks, prices broke through this support with sell stops triggered at 19.60 was breached. Prices then continued to weaken for the rest of the session as fund long liquidation appeared. The market closed near the lows before slipping further in the post-settlement period. The NV dropped 3 points to end at +3 while the NV was also 3 points weaker at -13. In London it was rather quieter with the QV ending slightly firmer at +7.10 while the VZ was virtually unchanged at +4.80. This meant the WP i9mproved with VV WP ending at 97.00 while the VZ WP finished at 92.20. It was a day that several bearish factors weighed on the market which was already under pressure with the burgeoning Indian production. The macro was overall bearish with crude down. The BRL lost 3% against the USD to end at 4.80 mainly as a consequence of the USD strength as many expect a more aggressive interest rate policy over the coming months. The OI in K-22 dropped 13,455 lots to 67,725 lots with another 34k lots traded on Friday suggesting limited interest in taking delivery against K-22.

The COT as of the 19^th April showed that during the period the funds/specs cut their net long position by 12,462 to 175,008. This small cut was expected with prices dropping 48 points during the period. The non-commercials cut their net longs by 7,976 to 119,115 as fund managers start to trim positions after the rally stalled. Following Friday’s large sell-off the fund are, probably, now below 100k lots net long with more liquidation likely. The commercials also saw a cut in the net short position as the trade cut shorts and increased their gross longs cutting their net short position by 7,170 to 432,090. As prices have fallen further the end-users have probably started to price. The Index funds increased their net long position by 5,293 to 257,083.

The USDA reported late last week that they see total Brazilian sugar production improving to 36.37 million tonnes which would be an increase of just under 3% compared to last season. They also see the sugar/ethanol mix remaining the same as last season at 45/55. They see total exports at 26.62 million tonnes which will mean ending stocks could be the lowest in decades at 1.9 million tonnes.

This morning the market gapped 6 points lower with first print at 19.15 on a much weak macro picture. The market then dropped further and is currently trading 18 points weaker. The KN is 1 point firmer at +4 while the NV is 1 point weaker at -14. In early London trading the QV and VZ are slightly weaker at +6.90 and +4.70 respectively. As mentioned above the macro is a negative picture this morning with crude some 3.5% lower and virtually all other commodities trending lower while the USD index is very firm and at its highest level since March 2020 mainly on the back of a more hawkish stance by the US Fed who are expected to raise interest rates by 50 basis points at their next meeting in early May. The sugar market not only has been caught up in the macro weakness but with the BRL weakening as well as crude means the sugar/ethanol split for the just started 2022/23 Brazilian CS harvest is more unlikely to change too much from the 45/55 split seen last season. With Indian exports at record highs and Brazilian new crop soon to shipped there would seem no shortage of raw sugar for the short to medium term. The funds may continue to sell which may see prices drop through the 19 cent level. However, end-users are poorly priced and are likely to buy, on a scale down basis, below this level. In the short term the chart gap left this morning maybe soon filled but, overall, the market looks weak and could fall back to the levels seen in mid-March at 18.50.