Sugar Market Report for 7 March

The market took a breather yesterday after hitting contract highs on Friday falling back slightly. The market had opened 1 point firmer but soon started to weaken. The market saw a steady decline during the morning. The weakness extended into the afternoon when the lows of the day were reached. However, as the selling dried up prices began to improve on speculative short covering. The market eventually closed with minimal losses on the day. The KN dropped 3 points to finish at +64 while the NV ended 2 points weaker at +31. In London, the market took an early dive and never recovered despite NY stabilising. The structure weakened with the KQ dropping over $3 to +13.40 as did the QV which also ended at +13.40. The WP took a hit with the KK WP dropping $7 to 120.20 while the VV WP was also weaker ending at 114.30. However, interest was limited with minimal block trades. As suspected Friday’s rally to contract highs was seen as a little over-done with the market falling back slightly yesterday. The size of the fund’s net long position still remains uncertain as the COT reports are still running some three weeks behind. The general consensus is their net longs are over 220k lots with some believing they hold a considerably larger position. In a market well supported by fundamental aspects it is, at the moment, potentially the most bearish factor as a mass liquidation could take prices down significantly. Looking at a long term seasonality chart for sugar a drop in prices is often seen in March.

Little fresh fundamental news around with traders and analysts continuing to digest views and opinions from the Dubai sugar conference. Indian production is falling away with most expecting total production between 33 and 34 million tonnes. The Brazilian CS cane crop looks in excellent condition. The next question is when the 2023/24 harvest will get underway. Many expect an early start as some cane was left last season However, it continues to rain across the CS region and looks set to continue for next 10 days. While good for the cane in the short term it will become a problem if the rains continue into April. After a rather dry February Europe will see more episodes of rain over the next week which will aid beet plantings which will get into top gear over the next few weeks.

This morning the market opened unchanged but soon turned higher. Currently, the market is 8 points firmer. The KN and NV are both 1 point firmer at +65 and +32 respectively. In early London trading, the KQ is a tad firmer at +13.60 while the QV is unchanged at +13.40. This morning the macro is mixed with crude unchanged, grains/soya mixed and USD Index also unchanged. The market continues to look very well supported and further gains over the contract high reached on Friday look likely. There is limited producer selling above the market so it would not take too much volume to see prices continue to improve after the consolidation of yesterday. The chart gap on the 1st month continuation between 21.04 and 22.00 may be too much of a stretch at the moment but the market may push up to the 21.20/21.50 level where the H-23 consolidated before expiry.