Weekly Sugar Wrap for 31 January 2022

Good morning,

The market continued to slid lower on Friday recording its eighth consecutive lower close and is now some 110 points off the highs reached on 20^th January. The market had opened just 1 point lower but immediately jumped 8 points to hit the highs of the day on market on opening buying. But as fast as they rose they fell and were soon back in the negative column. Values continued to crumble lower until US traders got to their desks when the losses became more substantial with prices dropping back to their lowest leve3l in two weeks. There was a marginal bounce but prices remained weak through to the close. The HK improved 1 point to settle at +34 while the KN lost 3 points to settle at +10. In London the spread slipped as well with HK ending at +8.70 and the KQ at +5.90. However, the WP held with HH ending at 94.00 and the KK WP at 92.70. It was another disappointing session for the bulls with the macro and fundamentals remaining bearish. The USD remained very firm as global geopolitical concerns continue while very heavy rain across Brazil’s CS continues to aid the cane after months of dry weather last year. The cane harvests in India and Thailand continue apace with analysts marking up total production slightly.

The COT as of the 25^th January was generally as expected. The funds/specs increased their net long position by 21,353 to 83,061 as gross shorts bought back positions put on the previously when prices were dropping to six month lows. This was during a period when prices rallied from 18.66 to 19.29 before falling back. The non-commercials increased their net longs by 13,581 to 60,248. The commercials increased their net short position by 24,974 to 259,176 as the trade cut longs and added shorts. The index funds increased their net long position by 3,621 to 176,116.

This morning the market opened 10 points firmer on an improved macro picture before more short covering appeared with prices pushing up another 5 points. Currently, prices are 14-15 points firmer. The HK is 1 point weaker at +33 while the KN is 1 point better at +11. In early London trading the HK is firmer valued at +9.20 while the KQ is also slightly firmer at +6.10. As mentioned to macro is positive this morning with, virtually, all commodities higher while the USD Index is weaker as it corrects after hitting its highest level since July 2020 late last week. The sugar market is likely to follow the macro to a certain extent but the possible increasing sugar production in the likes of India and Thailand which might see a more balanced S&D picture for the current season than previously expected is likely to limit any significant rally developing.