Sugar Market Report for 13 January

Good morning,

The market continued its recovery yesterday after the large post-Christmas sell-off. The market opened 8-10 points firmer and continued to improve throughout the morning adding another 16 points to the gains. Prices did dip slightly just after US traders got to their desks but a bout of fairly aggressive buying took prices to the day’s highs before more selling appeared as prices approached 18.50 which prompted some speculative liquidation which took prices lower. Nevertheless, it was a relatively positive settlement with prices now some 75 points off the lows hit on Monday. The HK improved 2 points to end at +28 while the KN was 1 point firmer at +18. In London the gains were much greater as good buying flat price buying of the front two months was noted. The HK improved by just over $4 to end at +10.90 while the KQ was also $2 firmer at +8.50. It would seem some white demand has stimulated some fresh trade buying. Chatter about a late start to the Brazilian CS harvest may have contributed to the enthusiasm. The WP, consequently, also improved with the HH gaining an impressive $8 to end at 98.90 and looking to push above 100.00. The KK WP also improved by nearly $4 to finish at 93.80. Several analysts pointed to the fact that crude prices have now recovered to their pre-Omicron levels and this could stimulate more ethanol demand and prompt Brazilian mills to increase ethanol production when the next season gets underway. Whether this has contributed much to the two day rally seen in sugar is debateable with a correction always likely when the fund selling eventually dried up.

Unica released their harvest data for the second half of December yesterday. Somewhat surprisingly, there was not cane crushed during the period and, consequently, no sugar produced. This is the first time this has happen during the second half of December since 2007. Therefore, the total CS production sticks at just above 32 million tonnes. Therefore, total production will remain around 16.75% lower than total production in the record season of 2020/21. Unica also said that Brazilian mills are unlikely to start next season’s crush early as it will take longer for the cane to develop. They predict that just 4 million tonnes of cane will be crushed between January and March some 50 % lower than the previous season. While recent rains have been good the cane will not be ready before the official start of the season at the beginning of April. As mentioned above analysts also see the majority of cane going the ethanol production when the season starts.

This morning the market opened unchanged before improving a tad. However, prices soon sagged lower and are currently 7 points weaker. The HK and KN are unchanged at +26 and +18 respectively. In early London trading the HK is slightly weaker at +10.40 and the KQ at +7.70. The macro is slightly negative this morning with most commodities trending lower. The USD Index is also lower while the BRL ended unchanged at 5.55. With the strength in London it is likely the raw will also remain firm and may improve further unless there is a large deterioration in the macro picture.