Raw can sugar has had extremely volatile winter months. Initially, its futures hit a 6-year high last week, hinting to spread further the inflationary wave by increasing the cost of making bakery goods, candies, and soft drinks.
On Wednesday, NY sugar saw a 6-year-high, and London sugar saw a 4-3/4 month high due to a report of lower sugar output and smaller exports from India. The ISMA initially sparked worries, reducing its 2022/23 India sugar production forecast to 34 MMT (million metric tons), compared to an Oct estimate 36.5 MMT. It also decreased its India 2022/23 export forecast to 6.1 MMT, compared to an Oct forecast of 9 MMT. The ISMA also stated that India's sugar mills are busy converting 4.5 MMT to 5 MMT sugar to ethanol production by 2022/23.
While top exporter Brazil was set to collect a much bigger crop, those supplies weren't expected until harvesting would begin around April — and right now the market is apparently tightening on low inventories. Weaker output and inventories ignited speculations that India would be forced to cap exports, while European production has been hit by drought and now faces uncertainty after a pesticide ban.
Further, rising concerns, the U.S. Commodity Futures Trading Commission did not issue a weekly Commitments of Traders report last Friday with the data delayed following the malware attack on ION Trading UK. But raw sugar futures fell on Monday, February 6, as concerns about short-term supply tightness appeared to be easing.
The Indian Sugar Mills Association (ISMA) last Thursday in fact reported that India's 2022/23 sugar output from Oct-Jan was expected to be up +3.4% YoY. Also, as a bearish factor, the International Sugar Organization (ISO) projected that global 2022/23 sugar production would climb +5.5% YoY to a record high of 182.1 MMT. Besides, ISO projected that the 2022/23 global sugar market would be in a surplus of +6.2 MMT.
March raw sugar (SBc1) was 0.75% down at 21.08 cents per lb in London yesterday midday, slipping further away from last week's 6-year peak of 21.86 cents. In the same fashion, CME’s Sugar #11 Mar '23 (SBH23) closed down -0.58 (-2.73%) at around $20.50 per 50 long tons.
Dealers said concerns about tight supplies appeared to be easing, particularly in the whites market where front month March has slipped to a discount to May LSU-1=R in the run-up to its expiry next Monday.Summary of forecast:
Raw sugar, along with Arabica and Robusta coffees, remain a highly volatile soft commodity – particularly, because of its significant impact on inflation due to the above described highly transmittable price effect. In addition, the underlying authorities often release mutually contradicting forecasts, making traders more uncertain and nervous about the price fluctuations of this “difficult” commodity. Therefore, sugar is best traded purely technically, by taking profits above $21.10— 21.20, and opening longs below $19 per contract.