Sugar Market Report for 10 January

Good morning,

The market dropped lower again on Friday dipping below 18 cents briefly for the first time since early August last year. The marker had opened 7-8 points firmer and quickly climbed higher on a slightly improved macro picture and some early short covering. The market gained another 18 points over the next hour but that proved to be the highs of the day as prices soon started to slip. By the time US traders got to their desks the market was back to unchanged and continued to slid lower over the next couple of hours with a very brief test below 18.00 cents. With no sell-stops triggered prices pulled off the lows but remained weak through to the close to settle at its lowest level since the 5^th August. The HK ended a couple of points weaker at +25 while the KN was 3 points lower at +11. In London the HK ended slightly firmer again at +6.00 as did the KQ which finished $1 firmer at +4.30. The WP also continued to strengthen with HH WP nearly $3 firmer at 87.90 while the KK WP was $2 firmer at 87.40. It was another disappointing day for the bulls as the market continued to drop. It has now lost over 130 points since just before Christmas as funds continue to liquidate longs. While they may cut further longs it is unlikely they will build a short position.

The COT as of the 4^th January showed the funds/specs cut their net long position by 17,846 to 109,233. This was probably slightly more than expected during a period that the market dropped 34 points in rather quiet trading. The non-commercials cut their net longs by 13,160 to 88,112. Given prices have dropped another 70 points since this report the funds have possibly cut their net longs by another 20k lots so are now around 68-70k lots net long which is their smallest long position since late July 2020. The commercials also saw a cut to their net short position of 17,723 to 296,063 as the trade covered shorts and end users priced. One would assume end users have priced more over the past few sessions and are now considerably better priced than at the end of November. The Index funds increased their net long position by just 122 to 186,830.

This morning the market opened 10 points firmer before slipping back a touch. However, prices soon recovered and are, currently, back at their opening levels. The HK is a couple of points firmer at +27 while the KN is 1 point weaker at +10. In early London trading the HK is firmer again at +6.50 while the KQ is also up at +4.70. The macro is mixed this morning with Crude slightly firmer while most other commodities are trading slightly lower. The USD Index is firmer but only regaining some of the losses seen on Friday afternoon. The BRL ended the week at 5.63. The sugar market appears to have few friends at the moment. Sentiment has changed over the past few weeks as the harvests in Indian and Thailand progress well and it continues to rain across Brazil’s CS which many believe has increased the amount of cane available for the next harvest. More rain is forecast for the next 10 days. Nevertheless, prices have now dropped to a level which is close if not below ethanol parity in Brazil so the downside would seem limited assuming the funds selling dries up. However, it is now a long way back to their highs seen at the beginning of December and although a sizable correction maybe seen prices may struggle to make much headway above 19 cents for the time being.