Sugar Market Report for 23 May

Yesterday was virtually an inside day as the market continues to remain range bound albeit at the top of the range. The market had opened 3 points weaker but soon recovered and gained another 18 points in the first 10 minutes of the session. The early buying soon dried up with prices soon dropping back. By the time US traders got to their desks prices had fallen to the lows of the day but soon recovered ending the day at the highs of the day although prices did dip on the post-settlement window. The structure improved as the flat price continued to improve with the NV gaining 5 points to finish at +34 while the VH was 2 points firmer. In London the structure was barely changed with the QV ending at +11.90 and the VZ at +11.10. It was the same for the WP as the VV WP was a tad higher at 135.50 while the VZ was unchanged at 124.40. Another quiet but relatively volatile day. The market has weathered the negative macro better than most commodity markets but with the funds still seemingly reluctant to increase their longs the up-side looks limited while there is good support below the market while the uncertainty of weather in various regions continues.

The EU crop monitoring service reported this morning that they forecast EU 2023 sugar beet yields at 76.7 tonnes per hectare compared with the 5 year average of 72.6 tonnes per hectare. If this turns out to be the case then the additional yields will off-set the drop in the planted areas to a certain extent. However, there is a long time before the beets are lifted although soil moisture levels are relatively good in Northern Europe.

The ISO announced yesterday that they have reduced their expected production surplus for 2022/23 significantly from their last estimate back in February  of 4.15 million tonnes to 850k tonnes. They have revised down production in Europe, Thailand, China and India. While they did not give an estimate for 2023/24 their executive director, Jose Orive said during the New York sugar week he expected there to be a surplus of around 2 million tonnes.

Attention is on India and the impending monsoon season. After 4 years of consecutive adequate monsoons many believe the country is due a poor monsoon. This has been fuelled by the expected development of El Nino which may bring drier weather to India. The fact the monsoon is likely to start around 4 days late will have been noted by the bulls. However, despite very high temperatures in front of the start to the monsoon some regions, including Maharashtra, have seen more rain than normal over the past few months. The central states of Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh and Odisha have received an average of 76.6mm of rain considerably higher than the normal 28mm during the period from March to middle of May. Overall the country has received 12% excess rainfall but, of course, it has not been even as the East and Northeast of the country have received below average rainfall.

This morning the market opened unchanged but soon increased. Currently, prices are 10 points firmer. The NV is 1 point firmer at +35 while the VH is 3 points better at +48. In early London trading the spreads are stronger wither the QV at +12.30 and the VZ at +11.90. The macro is a negative picture this morning with most commodities low although crude is, currently, barely changed. The USD Index is firmer while the BRL ended at 4.96 last night. The market continues to look to remain firm but likely to remain within the range seen over the past 12 sessions. The trading volumes have dropped away recently mainly a consequence of being range-bound but this have increased the intra-day volatility.