Sugar Market Report for 11 May

The market pushed through resistance at 26.50 to settle at a new contract high albeit in thin trading volume. The market had opened 2 points weaker before slipping lower during the first part of the morning. The market found support just above 26 cents which, eventually, encouraged some short covering and fresh buying. However, by the time US traders were at their desks prices started to improve and were soon just below the previous resistance between 26.45/50. A couple of buy stops were triggered as 26.50 was breached taking prices up to the day’s highs. Prices remained at top end of the day’s range through to the close only dipping slightly during settlement. The NV was 1 point firmer at +36 while the VH improved 3 points to +42. In London the gains were not as great and the structure was barely changed with QV slightly firmer at +9.40 and the VZ unchanged at +9.40 as well. The WP dropped slightly with the VV WP ending at 129.00 and VZ at 119.60. After struggling over the past week to break again above 26.50 fresh buying kept the up-side momentum going as prices broke up towards the recent highs of 26.83. Chatter of days lost to rain in Brazil’s CS during late April and potential drop in Thai production next season were, probably, the catalyst for the push higher. A test of the recent N-23 high now looks likely.

Unica will release their harvest data for the second half of April this afternoon at 15:00 (London time). It is calculated that around 3 days were lost to rain when field operations were suspended. A S&P survey estimate 25.6 million tonnes of cane was crushed producing 1.24 million tonnes of sugar which would be over 30% higher than the same period last season when it got off to a slow start as mills awaited the cane to mature further. This year the harvest has also seen a stuttering start due to rains which severally impacted production in early April and continued into the second half of the month. However, it has been dry over the past 10 days suggesting first half of May figures will be good.

Czarnikow believe the next Thai cane crop will only reach 74 million tonnes some 20% less than in the recently finished 2022/23 crop. The main reason for the drop is that farmers will continue to switch to more profitable crops such as Cassava which has also risen in price recently with good demand from China for Cassava chips and starch. The second reason is that the development of El Nino which can result in reduced rainfall across Asia. The severity of El Nino is yet to be determined and how quickly it may develop but it is not expected to impact until later this year.

This morning the market opened 4 points weaker before quickly dropping another 10 points. However, prices soon recovered and are, currently, 3 points lower. The NV and VH are both 1 point firmer at +37 and +43 respectively. In early London trading, the QV is a tad firmer at +9.70 as is the VZ at +9.90. The macro is a negative picture this morning apart from crude being higher. Most other commodities are lower due mainly to a strong USD. The USD Index is at its highest level in a week while the BRL ended slightly stronger at 4.95 last night. The market remains strong and looks unlikely to retreat too far at the moment. Indeed a test of the recent highs still looks to be on the cards. The fundamental picture will probably have to deteriorate further if the K-23 highs are to be reached at 27.41.