Sugar Market Report for 11 April

Good morning,

The Market rallied 60 points on Friday only easing slightly on the close to settle at its highest level since 17^th November last year. The main driver was continuing concerns that more Brazilian cane will be used to make ethanol as opposed to sugar as crude improved. There was also general buying by the funds across the commodity sector in which sugar got caught up. The market opened 9 points firmer before falling back to unchanged but that weakness was fleeting with the lows of the day soon in place. The market then started to steadily improve soon breaking above 20 cents where some initial resistance was seen. However, a wave of fund buying soon had prices up another 20 points. The fund buying continued through to the close ensuring a strong close although prices did drop 10 points during the post-close period on some speculative long liquidation. The volume was huge (337k lots) with a combination of fund buying and fund rolling. The KN ended unchanged at +14 while the NV was 8 points firmer finished at +4 ending at a premium for the first time since early March mainly on the fund buying of the flat price and concerns over the likelihood the Brazilian CS harvest will start late as mills allow the cane to mature further. In London the structure weakened again slightly with KQ ending at +8.90 and the QV at +6.70. This meant the KK WP eased slightly to 110.40 while the VV WP was a tad firmer at 98.80. The market had been working up to break higher over the past few sessions and Friday saw a wave of fund buying which soon absorbed the scale up selling which was limited. There was a general overall positive sentiment across commodities in which sugar has got caught up despite seemingly ample physical supply.

The COT as of the 5^th April showed the funds/specs had increased their net long position by 34,697 to 132,253. During the reporting period prices rallied 70 points so the increase was expected. The non-commercials increased their net longs by 24,753 to 81,313 but have probably increased by another 25k since then and are now possibly around 105k lots net long. The commercials increased their net shorts by 40,623 to 375,487 as producers sold and trade liquidated. The Index funds increased their net long position by 5,927 to 243,735.

The Indian Sugar Mills Association reported on Friday that they now see total Indian production at a record 35 million tonnes and they expect exports to reach 9 million tonnes despite talk that the Government might restrict exports to 8 million tonnes. The increasing production may have seen them relent. This latest increase in expected production is some 3.6 million tonnes more than their initial pre-harvest prediction. Looking further forward and assuming an average monsoon another large production will be seen next season although due to increasing ethanol production it is unlikely to reach this season’s total.

This morning the market opened 8 points lower before dropping another 13 points on market on opening selling mainly due to a weaker crude quote. Currently, prices are around 26-27 points lower. The KN is 1 point weaker at +13 while the NV is 2 points weaker at +2. In early London trading the KQ is firmer at +9.70 while the QV is a tad weaker at +6.60. With four sessions to go before the K-22 expiry the OI sits at 16,366 lots with another 8,439 lots traded on Friday of which 3,811 lots were EFP’s so the OI could drop around 4k lots today. The macro is negative this morning with crude around 2.5% weaker with grains mixed. The USD Index is firmer after pushing above 100 on Friday its highest level since May 2020 on a view that the Fed may increase interest rates by 50 basis points at their next meeting. The BRL fell slightly on Friday to end at 4.71 mainly on the strong USD. It is difficult to justify prices at nearly 20.50 from a fundamental basis especially with crude some $35 per barrel off the highs reached on the 7^th March. Nevertheless, the fund’s have found their buying appetite for sugar and have ample ammunition to buy considerably more if they so desire. Support should initially be seen at 20 cents although there is unlikely to be much buying below the market if the funds do not participate.