Sugar Market Report

Good morning,

The market regained all and more of the late losses of Monday to post its highest settlement since May 2017. Again, the macro was the main driver with majority of commodities higher and the USD continuing to weaken. The market had opened virtually unchanged but soon started to improve pushing above 15.90 for a while. Initially, there was little sign of any fresh fund buying which saw prices ease back to unchanged and eventually in the negative column early afternoon. However, a bout of good fund buying appeared with prices jumping just under 50 points in the space of an hour aided by limited producer selling in the front two months. A new high for the move was seen (albeit just 2 points) with a strong settlement. The HK jumped 16 points to end at +97 while the KN also improved 7 points to settle at +58. In London the gains were more limited although the structure continued to improve with the HK ending $1 firmer at +11.50 as was the KQ at +11.00. However, the HH WP slipped to 81.90 having traded at 85.00 in early trading where decent selling was found. The KK WP ended firmer at 91.80. The Agricultural commodity markets continue to see good fund buying as they continue to increase their record long positions across the sector. It is likely the funds are now close to 200k net long in sugar joins in the buying frenzy. The fund buying of the front month saw the structure strengthen with, unsurprisingly, limited producer selling in the front two months. However, further down the board there was limited gains with K-22 and beyond ending weaker on the day.

The strengthening of the front two spreads suggests physical tightness before the start of the 2021/22 Brazilian harvest despite India being able to export at current prices. Whether the exporters are geared up to export quantity in the next few months is debatable. The other question is whether there is pent up demand. Nevertheless, the overall fundamental picture continues to be more positive with the likelihood that production in Brazil next season will be lower. The Thai harvest is off to a very modest start. As of the end of 2020 the cane crush had reached 10.2 million tonnes down 56% from the same time a year earlier while sugar production was just 957k tonnes some 58% lower than by the end of December 2019. However, it is very early day with only 44 out of the 57 mills in operation. The late rains after months or dry weather maybe helping the cane and the mills maybe delaying in hope of yields improving slightly. EU production looks unlikely to reach 16 million tonnes, which would be a four year low after a very difficult season with disease and infrequent rains hitting beet yields and sugar content. However, Indian production is looking very robust. Brazil is still exporting large quantities of sugar well above the previous year. In December total sugar exports from Brazil reached 2.98 million tonnes 52% higher than the 1.44 million tonnes exported in December 2019.

This morning the market opened unchanged before improving 8 points to hit a new high for the move. The HK has improved to +100 while the KN is also slightly firmer at +59. In early London trading the HK is slightly firmer at +11.70 while the KQ is unchanged at +11.00. The macro is positive again today with the USD weaker again and most agricultural commodities higher. Nevertheless, the BRL continues to weaken ending last night at 5.285. While the funds continue to favour agricultural commodities there would seem no reason for sugar prices to continue to improve. Whether prices can breach the 3 ½ year highs of 16.59 seen on the 22nd May 2017 remains to be seen but with limited selling in the front month it will be down to the fund’s appetite – their exposure in H-21 compared to the open interest is large


Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598



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