Sugar Market Report for 5 December

Friday saw the market remain in the negative column for most of the session with a third lower close in a row. However, the trading volume was, again, limited. The market had opened 4 points lower before immediately dropping another 13 points mainly on a slightly negative macro picture. Prices remained under pressure hitting the day’s lows early afternoon before gradually improving eventually crawling into the plus column only to dump 16 points during the 5 minute settlement period on some late day trader long liquidation which emphasised the thinness in volume. However, the HK remains very firmer ending 9 points up at +115. The KN was also 7 points firmer at +68. In London, it was quiet with the HK finishing a tad weaker at +11.10 while the HQ was virtually unchanged at +17.10. this meant the HH WP ended weaker at 103.50 while the KK WP was unchanged at 117.50. It was a slightly directionless day as the market continues to consolidate after hitting 6 month highs in the middle of November. While the flat price looks vulnerable after three consecutive lower lows the structure remains very firm.

The COT as of 29 November showed that the funds/specs cut their net long position by 10,693 to 157,847. During the reporting period, the market dropped just under 70 points so expectations were, probably, for a slightly larger cut in the net longs. The non-commercials cut their net longs by 6,424 to 115,079 showing there was no major fund liquidation despite the large 143 point fall from the highs. One would assume liquidation would increase if prices breached the 19 cent level. The commercials cut their net short position by 9,804 to 364,214 as trade covered shorts with very limited producer selling and not much sight of any end-user pricing. The Index Funds increased their net longs by a marginal 886 to 206,368.

This morning their market opened 7 points firmer before improving further. Currently, the market is trading 11 points higher. The HK is 1 point firmer at +116 as is the KN at +69. In early London trading, the HK is valued around +11.20 while the KQ is valued firmer at +17.70. The macro is a mixed picture this morning with crude higher while grains/soya are lower. The USD Index is virtually unchanged while the BRL weakened slightly on Friday to end the week at 5.22. The market looks likely to continue to consolidate around the 19.50/60 level. The flat price may come under pressure with further liquidation but while the structure remains firm it is unlikely prices will collapse unless there is a drop to below 19.00. Whether the funds are in the mood to increase their net long remains to be seen but for the time being, they would probably need prices above 20.00.