Sugar Market Report
Friday saw prices drop again settling at their lowest level for a month. The trading volume was poor again reaching just over 71k lots. The market had opened 4 points better but soon dropping into the negative column making the opening levels the highs of the day. Prices remained under pressure throughout the morning gradually slipping lower. The weakness continued into the afternoon with the lows of the day being hit mid-afternoon. There was a sharp bounce of over 25 points as day-traders covered but it was short lived with prices soon dropping back to close weak and just 5 points off the lows of the day. The HK came under pressure again losing 7 points to settle at +60 while the KN dropped 3 points to end at +47. In London the HK lost $1 to settle at +4.80 while the KQ was also a little weaker at +5.50. This put the HH WP virtually unchanged at 79.00 as was the KK WP which ended at 87.40. The day saw another slow deterioration in prices as the funds continued to cut longs (as noted across other agricultural commodities) despite no really change in the fundamental picture. The Indian export question remains unanswered but the harvest continues apace and with rains across Brazil’s CS continuing and a view the Thai cane crop maybe not as bad as first feared traders, obviously, feel that the tightness early next year maybe subsiding to a degree.
The COT as of the 1st December showed that the funds/specs cut their net long position by 30,114 to 202,174. The non-commercials cut their net longs by 16,551 to 158,330. A reasonable drop was expected at prices dropped 64 points during the reporting period. The commercials also cut their net shorts by 28,524 to 498,124 as trade and producers cut shorts on the continuing weakness in prices. The Index funds had a very quiet week cutting their net longs by just 36 to 277,951.
BP Bunge Bioenergia reported that they have taken advantage of ‘rare market conditions’ to hedge a large amount of the sugar production for the next two season citing weak BRL and a rising futures market as the main reasons. They said they have hedged 60% of their 2021 and 40% of their 2022 sales. They are now holding off pricing more on concerns over the dry weather in Brazil and an appreciating BRL. While they may have priced more than the average of Brazilian mills it does suggest that they do not see too much up-side potential and prices could slip back towards 12 cents.
This morning the market opened 4 points lower before slipping another 4 points slightly lower than Friday’s low. Currently prices are around 3 points weaker but the volume so far is very limited. HK and KN are near unchanged at +59 and +46 respectively. In early London trading the HK is a tad firmer at +5.00 while the KQ is virtually unchanged at +5.6. This morning the macro is negative with the USD firmer and most commodities lower. The BRL ended at 5.15 on Friday maintaining the gains seen recently. It would seem likely prices will continue to decline especially if the funds decide to continue to cut longs. As mentioned about the funds are trimming their longs elsewhere and if they continue to do so it is likely to be seen in sugar as well. A breach of the lows of last week (14.33) may trigger further selling with limited scale down buying in place until 14 cents
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg
Phone: +44(0) 207 716 8598
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