The market improved on Friday after good support was found at 15.55 but the main action was in the front spreads with both NY and London seeing considerable strengthening of the front two spreads. The market had opened a couple of points weaker and remained under pressure for the first hour but with good support noted at below 15.55 prices soon started to improve slowly building through the morning only to fall back as US traders got to their desks. However, a brief drop below unchanged was enough to confirm support was still there and prices swiftly improved as the front spread widened on good buying. Prices rallied over 40 points to momentarily push above 16 cents where enough selling was found to trigger the day-traders into liquidating and prices slipped back slightly. However, prices settled at their highest level in a week. The HK improved by 10 points to end at +75 while the KN was also ended 6 points firmer at +48. In London the front spread improved by just under $7 to end at +20.20 while the KQ was over $5 firmer ending at +17.80. A combination of shorts being caught unable to deliver and the global shortage of containers possibly making taking delivery more appealing for some trade houses. The strength is London saw the HH WP swiftly improve to settle around 107.00 while the KK WP was also firmer at 103.40. Later this week will see the start of the fund roll so it will be interesting to see whether the HK can maintain or build on the gains of Friday. There are, undoubtable some end user pricing still to be done with four weeks to the expiry of the H21 contract.
The COT as of the 26th January showed that the funds/specs had cut their net long position by 16,977 to 219,809 which was broadly in line with expectations as the market had declined by nearly 50 points during the reporting period. The non-commercials cut their net longs by 17,012 to 156,067. Since the report they have not seem to have done too much so it is likely they remain around 155/160k lots net long. The funds cut longs in the majority of agricultural commodities after the buying spree earlier in the month. The commercials saw their net shorts cut by 17,763 to 485,545 as end users prices as prices fell from the 3 ½ year highs. Trade cut shorts as well. The Index funds saw limited activity cutting their net long position by 786 to 265,735.
The Thai harvest is slowly improving with daily sugar production at around 125 k tonnes. Total crush so far is 35.7 million tonnes as of the 27th January which is still some 30% below last year’s total at the same time. However, sugar production is better at 3.747 million tonnes down just 3% year-on-year with better CCS at 12.43 up 0.66% compared with same time last year.
Th ISO see a global sugar deficit of some 3.5 million tonnes for the current 2020/21 season compared with their adjusted up surplus of 1.9 million tonnes last season. They have significantly increased their global deficit from their last estimate of just 724k tonnes. They have increased their consumption expectations to an increase of 2.9% during 2020/21 as they see consumption improving around the world despite the pandemic continuing.
China imported 910k tonnes of sugar during December. During 2020 China imported a total of 5.7 million tonnes an increase of 1.88 million tonnes year on year. This is due mainly to re-stocks when international prices dived earlier last year and the deregulation of national sugar imports. As analysts have mentioned earlier in January it might mean Chinese imports maybe limited for the first quarter of 2021.
This morning the market opened 10 points firmer before pushing up another 7 points to hit 16 cents where more pronounced selling was found. Currently, prices are holding just below 16 cents. The HK is 2 points firmer at +77 while the KN is 1 point better at +49. In early London trading the front spread is slightly firmer valued at around +20.50 while the KQ is also firmer again valued at around +18.50. The macro is positive this morning with most commodities trending higher with the USD around unchanged. Equity markets are also firmer after weakening last week. Sugar saw a positive end to the week and looks set to build on the late gains. However, whether there is the desire to push prices back to the highs seen in the middle of last month remains to be seen. Limited selling in the front month with more end user pricing to be done suggests prices could improve further especially if there is a desire to take delivery by the larger trade houses.
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Kevin Watkins, Steven Trigg
Phone: +44(0) 20 7716 8598
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