Sugar Market Report for 17 May

The market remained range-bound yesterday but still at the top of the range. The market had opened 3 points weaker but soon improved before falling back to opening levels during the morning. As US traders got to their desks prices started to improve hitting the highs of the day mid-afternoon but the buying soon dried up and prices quickly slipped away eventually closing at the top of the day’s range. Overall trading volume remains subdued at just over 100k lots. The NV finished unchanged while the VH ended 2 points firmer at +44. In London the structure improved again with the QV at +10.80 and the VZ at +11.50. The WP was also slightly firmer with VV WP ending at 137.00 and the VZ WP at 125.50. The market remains firm but without any significant buying from the funds is stuck within 90 point range over the past seven sessions as traders await further fundamental news.

Petrobras CEO announced yesterday a new pricing strategy for their products. He warned that there is no Government intervention in the pricing policy, unlike the last administration when Bolsonaro was keen to dictate fuel prices. The CEO was keen to emphasise that the new pricing strategy will not be a ‘return to the past’ and the company will preserve economic results and will not go below break-even levels. Nevertheless, Petrobras announced an immediate cut in fuel prices with gasoline down 0.40 BRL/Litre, Diesel down 12.8% and LPG down by over 21%. The announcement had no immediate impact on sugar prices as ethanol parity remains well below current sugar prices.

Wet weather has meant EU+UK sugar beet plantings are behind schedule which will mean a shorter growing season and could impact on yields. France’s farm ministry announced yesterday that they have revised down their beet planted area to 380k hectares 5.3% lower than last year and 11.8% below the five-year average. The bans on neonicotinoids pesticides and competition from other crops are the main reasons especially as yields were badly hit last season due to hot weather and drought.

All eyes are now turning to India and the start of the Monsoon which is likely to be delayed by a few days this year. The monsoon is expected to hit the Kerala coast on June 4th the Indian Government weather forecasters reported yesterday. The whole country is usually covered by the mid-July. There is concern that the emergence of El Nino over the coming months may impact on the amount of rain. Historic data suggests that El Nino can have mixed impact on the monsoon depending, to a certain extent, to the strength of El Nino. Given it is only just developing it may have limited impact this year although, as usual, it is not just the amount of rain but the distribution that is important.

This morning the market opened 7 points firmer on some light market on opening buying but soon fell back into the negative column. Currently prices are 4 points firmer. The NV and VH are both unchanged at +34 and +44 respectively. In early London trading the QV is firmer at +11.70 while the VZ is unchanged at +11.50. The macro is a negative picture this morning with most commodities trending lower while the USD Index is firmer. The BRL ended unchanged last night at 4.95. There would seem no reason for prices to move out of the recent 25.80 – 26.70 range. Good support is seen building below 26 cents but while the funds are reluctant to increase their net longs at the current high prices a break higher also seems unlikely unless more positive fundamental news appears.