Sugar Market Report for 24 November

Good morning,

The market reversed its three sessions of losses yesterday after the support at 19.60 held in early trading. The market had opened 6 points lower mainly on the back of a negative macro picture. The market remained under pressure for the rest of the morning session remaining within a narrow 11 point range for much of it. The lows of the day were hit just as US traders got to their desks. However, with decent buying noted below 19.60 and the macro picture improving prices started to improve improving through unchanged which appeared to trigger further fresh speculative buying. Prices remained firm pushing up to the high of the day shortly before settlement. However, to emphasis the speculative nature of the buying, prices dropped back below 20 cents during settlement and the post-settlement trading period. The HK improved 6 points to end at +34 while the KN finished 6 points better at +39. In London the structure also improved with the HK ending at +1.30 while the KQ gained $1.50 to finish at +4.90. This meant the WP also improved with HH WP at 75.00 and the KK at 81.30. Chatter about a late start to the next Brazilian CS harvest may have prompted the strength in K-22. Yesterday’s performance emphasised the good support noted over the past couple of weeks just above 19.50 with prices now back in the top end of the recent range.

Unica will release their 1^st half November CS harvest data today at 14:00 (London time). During the same period last year over 20 million tonnes of cane was crushed with 1.24 million tonnes of sugar produced. This year the total is expected to be considerably lower and below the second half of October crush of 17.2 million tonnes and sugar production of 858k tonnes. The vast majority of mills are now winding down operations for the season with total crush expected to reach 518 million tonnes and sugar production just creeping over 32 million tonnes.

The Brazilian agricultural statistics agency Conab said yesterday they see total CS crush at 520 million tonnes down 18 million tonnes from their August estimate. They also peg total sugar production for the CS at 30.7 million tonnes which is slightly odd given the cumulative total from Unica (not including 1^st half of November) is already at 31.2 million tonnes. Nevertheless, it again highlights the very large drop in production for this season compared with the record 38 million tonnes produced last season. Analysts are now turning their attention to the 2022/23 crop CS crop with the prospects of La Nina causing dryness across the sugar regions. The Australian weather bureau reported yesterday that a La Nina weather phenomenon had developed in the Pacific ocean for the second year in a row. They see this back-to-back La Nina short lived persisting until the late southern hemisphere summer or early autumn 2022. Nevertheless, it could cause dryness across Brazil’s CS just when decent rains are needed.

The US government announced yesterday they are increasing Mexico’s sugar export limit by 150k tonnes after the USDA had ‘identified a need for additional sugar supplies in the US market’. The additional volume has to be exported no later than the end of March 2022.

This morning the market opened 10 points lower from settlement but at the last print yesterday. However, prices soon recovered and are, currently, around unchanged. The HK is firmer in early trading 3 points better at +37 while the KN is 2 points firmer at +41. In early London trading the HK is quoted firmer valued at +1.50 while the KQ is valued at around +5.40. The macro is a positive picture this morning with crude slightly higher along with grains/soya and metals while the USD Index is virtually unchanged at 96.46 still near its highest level since July 2020. After the good recovery off the lows yesterday further gains would seem likely. However, the market looks likely to remain range-bound especially as US traders will be winding down for the Thanksgiving holiday tomorrow. It is unlikely Unica will liven things up too much unless production is more than expected.