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QSL Market Update – 20 April 2022

Raw sugar prices

Overview: The ICE 11 raw sugar market maintained its strength last week as we approached the expiry of the May 2022 contract, with almost the entire board reaching life of contract highs on Tuesday and again on Wednesday. The expiring May 2022 contract traded from a high on Wednesday of 20.51 USc/lb to a low on Thursday of 19.91 USc/lb, before closing the week at 20.06 USc/lb. 


Harvest: As anticipated earlier, it will be a slow start to the 2022 season’s crushing with most mills not expected to begin operating until late April or early May.

Ethanol: Spot ethanol parity rapidly climbed to surprising highs of 24.72 USc/lb sugar equivalent by the end of last week, strengthened by demand from recovering global energy prices. Rumours of Brazilian mills buying back their sugar hedges to take advantage of superior ethanol prices are entering the market, indicating a strong portion of the new season’s crop could be heading towards ethanol. 

India: The Indian Sugar Milling Association (ISMA) has upgraded India’s crop estimate to 35 million metric tonnes (mt) of sugar from 33 million mt, while also increasing the forecast for sugar exports to 9 million mt, making this a record year for India. India has currently sold 7.6 million mt of sugar with 6 million mt already exported. While this will reduce internal stock levels, the expectation of another large crop next season means stocks could be replenished then.

Thailand: Only 23 mills remained operational into late March with the daily throughput rate decreasing to just 0.068 million mt of cane per day. As of the 7 April, 91.5 million mt of cane had been processed and 10.06 million mt of sugar produced. 

Commitment of Traders (speculator activity): Speculators continued to buy into the ICE 11 market last week, pushing their net long position higher by 55,000 lots. The Commitment of Traders report dated 12 April recorded a 187,000 net long position. 


Overview: The Australian Dollar (AUD) lost ground last week off the back of a strengthening US Dollar (USD) resulting from higher expectations of rate hikes from the Federal Open Market Committee (FOMC). The AUD traded to a high of 74.93 US cents on Wednesday before briefly dropping below 74 US cents to a low of 73.92 US cents on the same day. 

US Data: In the United States, March headline inflation increased to 8.5% year-on-year and 1.2% month-on-month, against expectations of 8.4% and 1.2% respectively. Gasoline prices increasing by 18.3% was a major driver, while used car prices, airline fares and lodging away from home all declined as the country rebounds from the pandemic. Markets have now priced in 210 basis points of interest rate hikes by the US Federal Reserve (The Fed) after this economic data release, with expectations of a 50bps hike at its next meeting.

Australian Unemployment: March labour force data revealed total employment in Australia increased by 17,900 jobs with the unemployment rate fractionally decreased, printing at a flat 4.0%. With the unemployment rate continually trending lower, the Reserve Bank of Australia (RBA) will likely be looking to the upcoming wages data release on the 18 May before making a decision at its June meeting on the potential need for an interest rate hike. 

Central Banks Globally: The Reserve Bank of New Zealand became the first G10 central bank to raise interest rates by 50 basis points (bps) post pandemic when it announced the significant tightening last week. The announcement was shortly followed by the Bank of Canada also raising rates by 50bps, leading markets to believe 50bps hikes may be likely from central banks around the world. 

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