Written Commentary
ADM Appoints Monish Patolawala as EVP and CFO
July 10, 2024
Good morning,
The market continued its decline from the 3 ½ years highs on Friday never managing to climb above unchanged. The market opened 6 points weaker and below the phycological 16 cents level before dropping to the previous day’s lows where some support was found. This encouraged a bout of short covering and fresh buying by the specs which took prices back above 16 cents early afternoon. However, the rally was short lived with prices soon dropping back. Again some support was found around the 15.80 mark but eventually prices dipped lower hitting the lows of the day shortly before settlement. Values did improve a bit in the last couple of minutes but it was a negative close. However, the front spread remained firm despite the flat price weakness with the HK improving 3 points to settle at +79. However, the KN dropped another 7 points to finish at +44. In London the HK ended $1 firmer at +15 while the KQ was weaker at +11.60. The WP slipped again with the HH WP ending at 94.90 while the KK WP also ended weaker at 97.30. The fund trimming of the large long positions was not confined to sugar alone with most agricultural contracts seeing at bout of fund liquidation. The market settled nearly 90 points off the highs reached on the 14th January. A combination of a general negative macro picture and the view that the sugar fundamental picture did not justify the rally to 16.75 appears to have triggered the funds into adjusting the positions.
The COT as of the 19th January showed the funds/specs had increased their net long position by a modest 2,339 to 236,786. The non-commercials only increased their net longs by 7,337 to 173,079 despite the big rally during the reporting period which suggests that some of the buying was enforced short covering and that they then liquidated position over the next two sessions that took prices off the highs. With good profits in their books it is, probably, unsurprising that the funds decided to ‘book’ some profits. The commercials cut their net shorts by 2,953 to 503,307 with a mixture of producer and end-user pricing noted. The latter may have been panicked into pricing as prices rallied. The Index funds cut their net long position by 5,293 to 266,522.
The Syrian state agency, the General Foreign Trade Organisation, has announced opening a tender for 85k tonnes of refined white sugar. The tender closes on March 1st and shipment is three months after a letter of credit is opened. Indian exports will be looking to win this tender.
This morning the market opened a couple of points higher in thin volume. Currently prices are 6-7 points firmer. The HK is 1 point better at +80 while the KN is unchanged at +44. In early London trading the HK is firmer at +15.60 while the KQ is unchanged at +11.60. This morning the macro sees a slightly positive picture after the general weakness seen late last week. The USD is slightly weaker while the BRL took a dive on Friday ending at 5.475 as economic concerns remerge as the pandemic continues to cause huge cases and death across the country. Sugar looks likely to try to consolidate around current levels following the drop from the 3 ½ year highs. The funds are unlikely to cut much more of their longs. The question now is whether they reinstate longs if the macro turned positive again.
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Kevin Watkins, Steven Trigg
Phone: +44(0) 20 7716 8598
Email: admisi.sugar@admisi.com
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