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QSL Market Update – 22 March 2022

Raw Sugar prices


Overview: Raw sugar prices retreated last week as oil markets experienced a correction from highs of approximately $US130/barrel to close last week at $US107.93/barrel for Brent Crude oil. The prompt ICE 11 contract, May 2022, made its high on Monday at 19.20 USc/lb before falling to a low of 18.51 USc/lb on Wednesday and eventually closing the week down 1.6% at 18.93 USc/lb.


Thailand: Rain in the first fortnight of March caused slight disruptions to harvesting in Thailand, dropping the daily milling rate to 0.625 million tonnes of cane/day. By 15 March, Thai mills had processed approximately 58.4 million tonnes of cane and produced 9.3 million tonnes of sugar. The sugar content has lagged behind last year, averaging 109.1kg/t due to irregular rains during the harvest. Forecasts remain unchanged at 10.1 million tonnes of sugar.
Brazilian weather: The last four weeks have seen below-average rainfall to the Sao Paulo region, with the past fortnight recording 52 mm of rain (approximately 30% below average for the period).


Commitment of Traders (speculator activity): Surprisingly, speculators liquated a sizeable portion of their net-long position last week, possibly rebounding after overshooting with a massive increase the week before. A position of 88,000 lots net long was recorded on 15 March; a reduction of 51,000 lots week-on-week.


Currency


Overview: The Australian Dollar (AUD) strengthened across the week as risk sentiment returned to markets based on optimism towards Russia-Ukraine discussions. The AUD closed the week above 74 US cents for the first time in 2022 and is the strongest G10 currency for the year to date.


US Interest Rates: As widely expected, the US Federal Open Market Committee (FOMC) raised the national interest rate by 25 basis points to 0.5% on Thursday. The FOMC president Joe Powell told a press conference that “the American economy is very strong and well positioned to handle tighter monetary policy”. The announcement came after inflation was tracked at 7.9% last week and with the invasion of Ukraine likely to push this figure even higher, indicating that consecutive rate hikes in quick succession are likely.


AUS Data:
The Australian unemployment fell 0.2% to 4.0% in February, equalling its lowest level in the history of the official monthly survey which began in 1978 (a quarterly measure was recorded before that). Employment also rose by 77.4k jobs, far exceeding the market’s consensus forecast of 37k jobs. Whilst the RBA has remained patient so far, a record low unemployment rate is likely indicating a rate hike is approaching in the near future.

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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