Sugar Market Report

Good morning,

The market hit a fresh eight month high yesterday breaking above 15 cents before slipping back by the close after Unica data was released and the BRL took a tumble. The market had opened 6 points firmer before improving further and to just shy of the 15 cent level. Prices then remained within a narrow 10 point range occasionally flirting with 15 cents. It was only after US traders got to their desks that prices finally pushed through although it did not trigger any buy stops or any sizable fresh buying. Values started to slip as Unica released its harvest data for the first half of October despite being broadly in line with expectations. Further profit taking saw prices dip into the negative column as the BRL dropped to its lowest level (5.71) against the USD since 19^th May on a jump in Government borrowing. However, this drop was short-lived with prices soon recovering to settle around opening levels. The front spread continued to strengthen dramatically as concerns over raw availability for the early part of next year continue due to the lack of clarity on India’s export subsidies. The HK climbed to finish another 13 points firmer at an impressive +92. The KN was also 7 points better at +64. In London the ZH finished a tad weaker at -3.40 but the HK, in line with NY, settled $1.70 firmer at +6.40. However, there was little change in the ZH WP that ended slightly weaker at 70.50 while the HH WP ended unchanged at 74.00. There was somewhat of an inevitability that the 15 cent level would be breached. However, it was probably more of a surprise that prices took a tumble after Unica although the subsequent recovery continues to emphasis the market’s strength at the moment.

Unica released its 1^st half October harvest data for CS yesterday afternoon. It showed that 36.85 million tonnes of cane was crushed during the period with 2.61 million tonnes of sugar produced from a split of 45.36%. The ATR still remains high at 6.045. Cumulative sugar production is now at 34.67 million tonnes, some 10.9 million tonnes more than at the same time last season. This suggests total production could hit 38 million tonnes – some 12 million tonnes more than last season. While the data was broadly in line with expectations it did emphasis that Brazil’s CS is on course to produce a record amount of sugar this season.

Brazil’s Datagro sees the cane crush dropping next season in Brazil’s CS region because of the dry weather between June and September this year which they see as having an impact on agricultural yields. The see total cane crush for CS at 575 million tonnes compared with 596 million tonnes this season. This will mean sugar production will drop around 5% from 38 to 36 million tonnes. It would seem a bit early to make assessments about the cane prospects for next year especially as rains have started to improve soil moisture levels. Some analysts believe the cane has amble time to recover assuming the rains continue.

This morning the market opened 12 points lower on a weak macro picture. Prices have now recovered some of the opening losses, currently, trading around 7 points lower. The HK is maintaining its strength valued at around +91 while the KN is a couple of points weaker at +62. In early trading in London the ZH and HK are around unchanged at -3.50 and +6.30. The macro is a sea of red this morning with equities, crude and most commodities lower while the USD is higher again. While sugar may slip on the back of the macro it is unlikely any collapse will be seen while the uncertainty of India and their export policy remains unclear. However, it might hamper efforts to push significantly above 15 cents in the short term.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598

Email: admisi.sugar@admisi.com

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