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QSL Market Report – 21 December 2021

Raw Sugar prices

⦁ Overview: Raw sugar prices drifted lower across the week, driven by weak trading volumes as we enter the holiday period as well as market nervousness after the Federal Open Market Committee (FOMC) meeting last week. The prompt March 2022 ICE 11 contract traded from a high of 19.85 USc/lb on Monday, down to a low of 19.58 USc/lb on Friday.

⦁ Brazil: The latest UNICA (Brazilian Sugarcane Industry Association) report for the second half of November revealed a mere 3.9 million metric tonnes (mt) of cane was crushed and 160,000 mt of sugar was produced for the fortnight. The sugar mix was again lower at 32.45% for the two-week period, while 32 million mt of sugar and 520 million mt of cane has now been produced season to date. Note, some mills continue to crush year-round however the production numbers from this point are likely to be considered negligible. 

⦁ Weather: Mostly fine weather has been forecast for both India and Thailand, providing favourable conditions for harvesting. Thailand is set to be entering its third week of crushing, while India is progressing at a record pace with 184 mills in operation (compared to 171 at the same time last year).

⦁ Commitment of Traders (speculator activity): The latest Commitment of Traders report dated 14 December revealed speculators added a further 35,000 lots to their position which now sits at 165,000 lots net long. On a live basis however, this position is likely to be considerably smaller given the ICE 11 price has fallen since the last report.


⦁ Overview: The Australian dollar traded in a choppy range-bound fashion for the week. The AUD traded to a low of 70.94 US cents on Tuesday and to a high of 72.23 US cents on Thursday. 

⦁ United States: The FOMC announced a mid-March finish to its quantitative easing program by doubling the pace of the taper at its two-day December meeting last week. Global markets took the news of the accelerated taper profile (from $US15 billion to $US30 billion) cautiously, with many currencies including the AUD depreciating against the USD. The FOMC dot plot now shows three rate hikes predicted for 2022 which was unsurprising for markets given inflation recently broke 39-year records. 

⦁ COVID-19: Omicron concern continues to plague international markets after news that the Netherlands will be the first country to go into lockdown through the Christmas holiday period. New studies in South Africa indicate vaccines provide a high degree of protection against severe illness to the variant, however markets remain cautious given cases appear to be doubling on average every 1.5-3 days which could have the potential to overload hospital systems globally. 

⦁ New Zealand: Across the ditch, the New Zealand dollar underperformed on Thursday after an announcement that Q3 Gross Domestic Profit (GDP) fell by 3.7% against market forecasts of only 3%. COVID-19 related restrictions are more than likely the main limiting factor for the Kiwi economy rather than weakness in underlying demand. Q4 GDP will likely reveal a strong recovery as restrictions were eased for the majority of this period.

This is a whole-of-season ICE 11 price chart for the 2021 Season, current as of 21 December 2021, based on the current 5:1 pricing ratio applicable to QSL Target Price Contract growers. Source: Bloomberg

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