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QSL Market Update – 23 February 2022


Raw Sugar Prices

Overview: The stagnant ICE 11 sugar market experienced another week of trading in a narrow range. The March 2022 contract lost 6 points (0.3%) over the week to settle at 18.20 USc/lb, after trading from a low of 17.96 USc/lb to a high of 18.48 USc/lb. 


March 22 contract expiry: As we approach the expiry of the March 2022 contract, the March 22/May 2022 spread has made solid gains, closing the week at 0.58 USc/lb. The recent strength of the spread, despite weak general market conditions, may indicate there are some traders competing to take delivery of some March 2022 contract sugar. Historically, CS Brazil (Centre South) is the largest deliverer of raw sugar to the tape of the March contract however it looks likely that only central american sugar will be tendered this year. 

India: An additional 9 Indian mills started crushing in the first half of February while 13 finished crushing for the season, leaving 503 mills active for the 2021/22 season. 22.1 million mt (metric tonnes) of sugar had been produced by mid-Feb (up 6% year-on-year), with forecasts increasing to 32-32.5 million mt of sugar for the season. 

Commitment of Traders (speculator activity): Speculators kept their net long position virtually unchanged week-on-week, recording a position of 44,000 lots on Tuesday 15 February, down only 1,000 lots from 45,000 the previous week. 


Currency


Overview: The Australian dollar found some strength over the week, despite markets remaining cautious as the world waits to see how the Russia/Ukraine situation plays out. The AUD traded from a low on Monday of 70.68 US cents to a high of 72.28 US cents on Thursday. 

United States: 
Interest Rates: A 50 basis points (bps) interest rate hike is now unlikely to be on the cards after being almost fully priced-in after the US Consumer Price Index (CPI) report a week ago. New York Federal Reserve (Fed) President John Williams said he did not see “…any compelling argument to taking a big step at the beginning”, when asked about the idea of a 50bps hike in March. Fed Chairmen Jerome Powell will make his next announcement on 2-3 March at his semi-annual monetary policy update to Congress.
 
Data Release: Further evidence was added to the US inflation story when the Purchasing Power Index (PPI), which measures inflation from a producer’s viewpoint (i.e. the change in cost of production), printed stronger than expected, up 1% month-on-month and 9.7% year-on-year against expectations of 0.5% and 9.1% respectively. 

Russia/Ukraine: Geopolitical risk aversion has caused headwinds for the Australian dollar as Russia appears set to invade Ukraine by stationing 120,000 troops on the border, and despite President Putin denying any intentions of an attack. Global markets are watching the situation closely as any signs of tensions boiling over is likely to sour risk sentiment.  
Russia/Ukraine: US president Joe Biden has said he is convinced Russian President Vladimir Putin has already decided to attack Ukraine and that an invasion will come within days. Adding further fuel to the fire, Russia has claimed to have successfully launched hypersonic and cruise missiles at sea during nuclear forces training in Belarus. Risk sentiment continues to swing as news headlines spook the already cautious global markets.

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

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