Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
Good morning,
Friday saw prices drop below 15 cent but recovered by the close in volatile but thin trading again. The market had opened a couple of points higher before quickly improving another 9 points to, what turned out to be the highs of the day. With little fresh buying around prices eventually slipped away from 15.40 and then remained caught within a narrow 9 point range until the afternoon when prices started to drop on some light long liquidation. The drop accelerated as prices dropped through 15.20 with a stop triggered at just below 15.00 cents which swiftly took prices to the lows of the day. However, enough support was found at the lows with the aggressive selling soon drying up. Prices then improved getting back to just shy of unchanged shortly before the close although some day-trader book squaring at settlement saw values ease to settle at the lowest level in a week. The HK improved 8 points to end at +94 while the KN was 1 point weaker at +72. In London it was also a quiet day with both HK and KQ ending unchanged at +10.00 and +11.70 respectively. This put the HH WP a tad firmer at 78.00 while the KQ improved $2 to end at 88.70. It was another day of limited volume which is accentuating the volatility. Traders continue to be very uncertain of the market as they continue to wait for news from the Indian government.
The COT report showed, as of the 17th November, the funds/specs increased their net long position by 13,653 to 257,286 during the period that saw prices improve 98 points to hit fresh 8 ½ month highs. The non-commercials look to have reinstate some of their longs liquidated over the previous fortnight increasing their net long position by 11,543 to 201,971. At the moment the funds seem reluctant to increase their net longs significantly over 200k lots which is probably not too surprising as their current net longs are around 46% of the H-21 open interest. The commercials increased their net shorts by 14,955 to 535,378 as further producer pricing noted hardly surprising with the market making new highs. It is now estimated that producers are now just over 50% priced for 2021. The index funds increased their net long position by 1,302 to 278,092.
This morning the market opened 9 points firmer before gaining another 13 points in the first 5 minutes of the session. Currently prices remain around 20 points higher. The HK is 1 point better at +94 while the KN is unchanged at +72. In early trading in London the HK is a tad firmer at +10.10 while the KQ is unchanged at +11.60. A positive macro appears to be the main reason for the firm market this morning. Equities, crude and other commodity markets higher while the USD is weaker. The BRL finished slightly weaker on Friday at 5.38. The market continues to look range-bound as traders await some conclusive news from India. Whether there will be any forthcoming remains to be seen but every week that passes is another week of lost export opportunities. The Indian harvest is gathering pace with sugar production in Uttar Pradesh already 30% higher than this time last year. With the volume still remaining very thin and producer selling becoming lighter until the recent highs of reached the recent highs (15.66) could be tested but whether there is a significant push though will depend on the fund’s appetite to increase their longs further.
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg
Phone: +44(0) 207 716 8598
Email: admisi.sugar@admisi.com
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