Sugar Market Report for 9 April

Good morning,

Prices improved yesterday but it was the weakening of the front spreads that was, again, the standout feature. The market opening around unchanged before swiftly improving on some early market buying which saw prices jump 16 points in the first 10 minutes of the session. Once this initial bout of buying dried up prices slipped back but remained in the plus column. Another spike higher was seen as US traders got to their desks as the highs of the day were hit. Again, the gains were short lived with prices dropping back to the opening levels. The market then remained in a 15 point range for the rest of the session with the spot month losing ground against the rest of the board going into the close. The KN came under pressure throughout the day but it was on the close that it narrowed to flat on some heavy fund rolling on the close. Just over three quarters of the total volume was spread related. The NV dropped to a 1 point discount by the close from +2 the previous day. In London the KQ went to a larger discount in relatively good volume ending at -3.90. The OI in K-21 dropped to 17,244 lots with just under 10k lots traded yesterday which continues to suggest a small delivery with few ken receivers. The WP was, essentially, unchanged with the KK WP ending at 90.40 and the NQ WP at 93.90. The flat price pushed higher as the correction from the six weeks lows continues. However, the continuing weakening of the spot months in both market suggests that nearby demand is limited. The weakness of the KN in NY is exacerbated by the fund roll but in London there appears a distinct lack of interest to take delivery.

The United nations food index rose for the 10^th consecutive month in March to 118.5 its highest level since June 2014. Sugar did not contribute too much to the monthly rise although still remains 30% up on the year. Vegetable oils, meat and dairy were the main contributors to the rise. The continuing rise in food prices should continue to see the funds remain long of most agricultural commodities which is likely to keep sugar prices relatively firm.

US weather forecaster CPC advised yesterday they see an 80% chance of La Nina transitioning to neutral over the next month and remaining neutral to, at least, July.

Ukraine’s economy ministry announced yesterday the country will need to import 110k tonnes of sugar this year after low production in 2020. Licences for the import of 50k tonnes will be issued in the near future after around 40k tonnes were imported in the first three months of this year.

This morning the market opened 8 points firmer in thin volume. Currently, the early gains are being maintained with spot month 10 points firmer. The KN has improved trading at +3 while the NV is also a couple of points firmer at +1. In early London trading the KQ is around unchanged at -3.90 while the QV is slightly firmer at around +4.60. The macro is a slightly negative picture this morning with crude and most other commodities slightly lower while the USD index is slightly higher. USDA data out later today which could see some volatility in the grains markets. Sugar looks likely to remain well supported further down the board with the uncertainty over the Brazilian CS harvest although both spots months look likely to remain under pressure although it would seem KN is finding some support around flat.