Sugar Market Report for 19 May

Good morning,

Yesterday saw prices start to consolidate after the drop in prices over the past week. The market opened 6 points firmer before quickly improving another 15 points on the usual market on opening buying. Prices remained firm throughout the remainder of the morning gaining another 10 points. However, just after US traders got to their desks a bout of selling appeared swiftly taking prices back to 17 cents where good buying was noted. This was enough to get the day traders to reverse positions which saw prices quickly rally gaining over 30 points to hit the day’s highs mid-afternoon. However, once the buying dried up prices slipped back although improved again before the close to settle in the middle of the day’s range and at its highest level in a week. The NV continued to weaken losing another 2 points to end at -15. However, the VH gained a couple of points to finish at -5. The trading volume did improve marginally to just over 107k lots but still is underwhelming. In London the structure improved slightly with the QV at -1.40 and the VZ at -1.60. However, this had little impact on the WP which saw the NQ WP finish a little lower at 79.70 with selling noted at 80.00 while the VV WP finished $1.50 weaker at 78.00. After a couple of settlements below 17 cents and end-user buying noted below 16.85 it was likely some consolidation would be seen. Nevertheless, there appears to be limited desire for prices to start to rally significantly hampered by the continuing weakening of the front spread in NY.

The Brazilian National supply company Conab added their view on the CS crop prospects yesterday saying that they expect the total cane crush to reach 574.8 million tonnes and producing around 35.8 million tonnes. As with other analysts they point to the 4.6% drop in the cane crush from last season as a consequence of low rain fall. The 10 day weather forecast for the main sugar cane regions of Brazil does see some rain which will be welcome but time will tell on the extent of the rainfall.

Sugar production in the European Union is expected to rise by 800k tonnes in the 2021/22 season to 14.7 million tonnes according the Peter De Klerk of the ISO. This increase is despite a marginal decrease in beet plantings suggesting that French farmers have replanted much of the beet lost to the early April frosts. He also said that EU sugar imports will decline to 1.45 million tonnes but exports will also fall to 700k tonnes next season.

Thai sugar cane production should see a recovery next season according to the senior analysts at Mitr Phol Sugar Corp. She expects the country’s sugar cane production to rise to 85-90 million tonnes a possible increase of around 25% from the current just ended harvest. She also expects sugar exports to be around 5-6 million tonnes and sees Thai exports competitive in the Indonesian market again where importers have had to switch to Indian and Brazilian sugars due to the limited Thai exports this season.

This morning the market opened 11 points weaker mainly on a negative macro picture before dropping down to just below 17 cents. As note yesterday so support has been seen at 17 cents and below so, currently, prices are holding just this level. The NV and VH are unchanged so far at -15 and -5 respectively. In early London trading the QV is slightly weaker valued at -1.80 while the VZ is around unchanged at -1.60. As mentioned above the macro is negative this morning with most commodities trending lower while the USD Index is unchanged although still below 90.00. The sugar market continues to remain nervous and unsure of direction after the large drop that started this time last week after hitting 18.25. Despite the continuing concerns over the Brazilian CS cane crop other producers are seeing prospects for next season continue to improve. The question of consumption also concerning the market. The Indian lock-down during a period when their sugar consumption usually spikes is likely to impact on any recovery that was expected suggesting more sugar into stocks and more potential to export. Nevertheless, end users are still poorly priced and will look to price into any decline so, unless the funds decide to liquidate then any collapse in price would seem unlikely.