Sugar Market Report for 1 November

Good morning,

The market dropped on Friday as the macro turned negative as most of the gains of the week were wiped out. The trading volume remained poor with the funds continuing to be side lined. The market had opened unchanged, improved slightly to hit the highs of the day in early trading. During the morning prices slowly dropped lower before settling into a narrow 6 points range in very thin volume. After US traders got to their desks prices started to tumble 40 points over the space of 3 hours as speculative long liquidation and fresh selling met with very limited buying. Eventually, some support was found as prices neared 19.20 but it was far from a convinci9ng close as prices only pulled some 5 points off the lows. The HK slipped 4 points to end at +32 while the KN lost 3 points to finish at +27. In London the ZH continued to improve, as the Z-21 expiry comes into view in a couple of weeks time, ending up $1.60 at +10.60. The HK was also firmer ending at +3.00. However, the structure strength had little impact on the WP with the HH WP ending slightly lower at 73.70 as was the KK WP at 77.70. While there was a general expectation that prices might struggle to improve to 20 cents most traders were not expecting prices to drop over 30 points. The rally off the lows of the previous week was on very thin trading volume which meant once the speculators turned to liquidate there was very limited resting buying below the market. The lower crude quote and significant rally in the USD index, as it reversed the drop the previous session and more, also added to the negative sentiment. The continuing good rains across Brazil’s CS maybe too late to reverse much of the damage done to the cane during months of dry weather but it is negative enough to deter the funds from reinstating longs as they see up-side as limited.

The COT report as of the 26^th October showed the funds/specs increased their net long position by just 825 to 159,136. However, looking at the breakdown the non-reportables increased their net longs by 14,856 to 47,019 but, more significantly, the non-commercials cut their net long position again by 14,031 to leave them 112,117 net long. This was during a reporting period that saw prices rally by just over 80 points suggesting the funds did not drive the improvement. The commercials saw a small increase of 515 in their net short position to 346,169 as the trade increased gross longs and shorts. The Index funds cut their net long position by 309 to 187,033. So overall a quiet week which was reflected in the trading volumes which continue to be well below average.

This morning the market opened 1 points firmer gained a couple more points before selling appeared to take prices down through the lows of Friday. Currently, prices have recovered slightly to 2-3 points lower. The HK is 3 points weaker valued at +31 while the KN is unchanged at +27.In early London trading the ZH is unchanged at +10.60 while the HK is valued a little firmer at around +3.30. The macro is negative overall this morning with crude still trending lower and grains/soya weaker. The USD index is unchanged but has erased the losses seen over the past fortnight. The market’s inability to push above 20 cents and, subsequently, drop back suggests prices may fall back towards the lows seen a fortnight ago. All the bullish news regarding the 2021/22 Brazilian CS crop is well documented and well entrenched within the market. The recent rains across the CS plus the start of the Indian and Thai harvests which both look to be good especially the latter is weighing on the market. For the time being the market looks likely to remain under pressure especially if the funds decide to liquidate further longs.