Sugar Market Report for 9 March

The market slipped back yesterday after hitting contract highs the previous session as the structure continues to weaken slightly. The market opened 2 points lower but immediately dropped 14 points before some support was found around 20.80. This encouraged some light short covering which saw prices improve to just above opening levels as US traders got to their desks. However, the improvement was short lived with prices dropping back to the lows of the day and just below the lows on the opening. The support was enough to buoy prices slightly by the close. The KN slipped 1 point to +57 while the NV dropped 3 points to end at +25. In London the KQ was a tad lower at +13.00 while the QV slipped slightly to finish at +15.10. The macro, which had been negative the previous session and continued weak seemed to finally catch up with the sugar market. Chatter about higher Brazilian production prospects and even the possibility of India allowing 1 million tonnes of exports also helped weigh on prices.

The Brazilian analyst Datago reported yesterday that they see the total Brazilian CS cane crush at 580 million tonnes producing 38.3 million tonnes of sugar with a 48% split. This production figure is at the top end of most current estimates with most at 37 million tonnes during the Dubai conference. However, despite this bold production figure, Datagro see a small 1.3 million tonne global production deficit for 2023/24 versus a very small 200k tonne surplus for the current season.

The delayed COT for the week up to the 14th February showed a modest decline in the funds/spec position of 2,617 to 202,139. However, the non-commercials increased their net longs by 2,235 to 160,882 during a week when the market rallied 60 points before falling back 64 points so the small increase was to be expected. Given prices have rallied over 160 points over the past three weeks- up until Tuesday’s highs it is though the funds have increased their net longs to well over 200k lots. Hopefully, the current situation will not be delayed much further than the official release date this Friday.

Improved beet yields by sugar producers in the USA saw the USDA increase their expectations for beet sugar production slightly to 5.16 million short tonnes in the latest report released yesterday. However, their stocks-to-use ratio estimate fell from 14.8% in February to 13.5% as imports were revised down after they cut their Mexican sugar production by 415k tonnes to 5.48 million tonnes.

According to Thailand’s Office of Cane and Sugar Board, the accumulated cane crush reached 86 million tonnes with production at 9.4 million tonnes. Of the 57 mills one has closed with another 8 closing by next week. This is relatively early suggesting total production may struggle to reach the higher estimates of over 11.5 million tonnes.

In a sign that French sugar beet production may fall further Tereos will close their factory in Escaudoeuves, Northern France, the company announced yesterday. They announced a large reorganisation of its industrial operations in France which includes: halting sugar production at Escaudoeuves, close the Morains distillery workshop and continue to look for a buyer for its Haussimont plant.

This morning the market opened 6 points lower before dropping further. The KN is 2 point weaker at +56 as is the NV at +26. In early London trading, the KQ is a tad weaker at +12.80 while the QV is also weaker at +14.60. The macro is mixed this morning with crude around unchanged, grains firmer, metals lower and softs generally lower. The USD Index is around unchanged while the BRL improved yesterday to end at 5.13. The market would seem to be at an important point. Can it make new contract highs or will a bout of long liquidation take prices lower. At the moment the latter looks the more likely although a large drop would seem unlikely. Fundamental news is mixed with uncertainty over Indian and Thai final production while some question whether Brazilian production will be as good as many believe. Then there is the large fund long position, although total size is still undetermined, which could start to weigh on prices if the upward momentum is not maintained over the next few sessions.