Sugar Market Report for 25 April

The market rocketed higher again yesterday posting new 11 year highs with a rarely seen 3 digit points gain in the spot month. The market had opened 6-8 points lower before immediately dropping another 20 points to post the low of the day as prices soon recovered back to unchanged. Prices then slowly improved throughout the morning gaining another 30 points before prices dipped slightly as US traders got to their desks. However, it was not long before prices started to improve again with the gains accelerating as prices pushed above 25 cents (basis N-23). Further buying appeared to ensure prices ended strong and near the highs of the day. The KN improved 10 points to +59 while the NV was 9 points firmer at +37. The OI in K-23 dropped to 63,001 lots with another 47,748 lots traded yesterday continuing to suggest a relatively small delivery made up of Brazilian and, perhaps, Centrals. London failed to match the pace of the gains in NY with the structure actually weakening slightly. The QV dropped to +12.00 its weakest since early March while the VZ dropped to +10.50 its lowest since 21st March. This meant the WP dropped with the VV WP down nearly $5 at 128.00 and the VZ WP down at 117.50. The market remains very strong with the bulls firmly in charge. With very limited availability of nearby raw sugar available until the Brazilian CS harvest gets into full swing there is precious little producer selling in the front two months. However, a lot of the bullish sentiment swirling around the market is purely conjecture. Chatter regarding weather issues are yet to be proved. The Indian monsoon does not start for another month and it is too early to make any assumption on the weather across the EU this summer. El Nino is likely to appear later in the year but how much impact it has remains to be seen.

The USDA see EU sugar production at 15.3 million tonnes. This would be 4% larger than last season’s production which was hit by drought and excessive heat but 6% down on the 2021/22 season. Reduced plantings across France will be off-set by higher plantings elsewhere across the region. Consumption is seen at 17 million tonnes.

In the UK British Sugar is struggling with supply after a poor harvest last year. They are having to source sugar from rival Tate & Lyle as well as other origins including Thailand for the first time in living memory. They will be hoping for a better harvest in 2023 but much will depend on the weather. Currently, the soil moisture is more than adequate but that can change dramatically during the summer as last year when record temperatures were reached.

This morning the market opened 5 points lower before slipping a little more. Currently, prices are 13 points weaker. The KN is 1 point weaker at +58 while the NV is unchanged at +37. In early London trading the structure is weaker with QV at +11.20 and the VZ at +9.60. The macro is slightly negative this morning with most commodities trending a tad lower while the USD Index is a little firmer. The BRL ended unchanged at 5.04 last night. The market continues to look firm with the correction of Friday completely wiped out and more yesterday. However, the market is well over-bought which may deter speculative buying at current levels. The weakening of London structure should be noted but it is unlikely to have too much impact on NY at the moment. At the moment sentiment is particularly bullish. Back at the beginning of March at the Dubai sugar conference, an end-of-event survey had no one predicting prices above 25 cents. Has there been enough of a change in the fundamentals for this view to have changed so much?