Sugar Market Report for 9 November

Good morning,

The market finally managed to push above 20 cents yesterday but did not have the ability to extend too far and eventually ended slightly lower on the day. The market had opened 4-5 points firmer and continued to improve over the next couple of hours pushing swiftly through the 20 cent level before hitting the highs of the day mid-morning. However, the early buying eventually dried up which saw prices drop back on long liquidation. The market continued to trend lower throughout the remainder of the session with prices eventually ending 1-2 points lower on the day. The trading volume was limited again at 84.6k lots. The HK ended 1 point lower at +29 while the KN was also a tad weaker at +34. In London the early gains held to a greater extent with the structure strengthening slightly. The ZH ended at +3.80 with a week to go before expiry. The OI dropped to 19,400 lots with another 5,400 lots traded yesterday. Currently, it looks as if the delivery maybe around 500k tonnes. The HK also ended back at a premium of +0.90. The flat prices strength relative to NY saw the WP improve with HH WP over $4 firmer at 71.00 while the KK WP was over $2 higher at 76.50. The market is now back in the middle of the range seen during September and early October with support growing as consumer demand improves due to prices dipping and freight rates ease. Whether the buyers will hold back now prices are around 20 cents remains to be seen but any dips are likely to be seen as a buying opportunity.

There is limited fresh fundamental news at the moment. Unica should issue their harvest data for second half of October in the next 2-3 days which is likely to show another significant slow down to the harvest as it comes to an end. Further episodes of rain are expected over the next 10 days to add to the decent rainfall over the past 6 weeks. The Indian harvest is slowly getting into top gear with most analysts still expecting sugar production at around 31 million tonnes. The Thai harvest promises to be significantly better than last season with higher plantings and much better weather.

This morning the market opened 2 points firmer in quiet trading before improving on light speculative buying. Currently, prices are 6 points firmer and holding just below the 20 cent level. The HK is unchanged at +29 while the KN is 2 points firmer at +36. In early London trading the ZH is a little weaker at +3.40 while the HK is virtually unchanged at +0.80. The macro is mildly positive this morning with crude slightly firmer while grains/soya are mixed. The USD Index is a tad weaker and the BRL around unchanged at 5.55. As mentioned above the market appears well supported with physical demand stimulated by the recent dip in prices and easing freight rates. With the down-side looking limited it may encourage further buying which could see prices improve again. The technical picture looks positive and there is probably limited resting selling above the market. However, trading volume remains subdued and the funds seem disinterested at the moment so any significant move higher would seem unlikely.