Sugar Market Report for 14 February

The market dropped yesterday as the London H-23 London sugar expired quietly. The market opened 8 points lower (basis K-23) but, immediately, jumped 12 points on some market on opening buying. However, once done prices swiftly fell back and this set the tone for the rest of the session. Prices continued to fall losing another 20 points by mid-day. Some initial support was found around 19.75 but this level was eventually broken with prices slipping to the lows of the day late in the session. Some late day-trader short covering saw prices improve but it was a relatively weak close. The HK lost 2 points to end at +152 while the KN slipped 8 points to settle at +59 its weakest level since 6th January. In London the H-23 expired with few fireworks. The HK finished slightly firmer on the day at +4.00 while the KQ weakened to finish at +15.40. This meant the HH WP finished at 95.60 with the KK WP at 125.10 and the KQ WP at 109.10. The spot month strength against the rest of the board remains firm suggesting no collapse in flat prices at the moment. However, the weakening of the KN suggests that the physical raws tightness that has supported the market for so long is seen to be dissipating later this year.

The London H-23 contract expired yesterday. Early indications is that a total of 3,819 lots (190,950 tonnes) were delivered. Man (2,319 lots) and Alvean (1,500 lots) are thought to be the two receiver while Wilmar was the largest deliver at 2,713 lots. Louis Dreyfus and Sucden made up the balance. The delivery was the smallest in 4 years and down from the 358,650 tonnes delivered against H-22. There will be little debate on whether bullish or bearish. Small delivery against a minimal spot premium as sugar passes from large trade houses to large trade houses.

This morning the market opened 4 points firmer but soon slipped back. Currently, the market has recovered and is 5 points firmer. The HK is 1 point firmer at +153 while the KN is 1 point weaker at +58. In early London trading the KQ and QV are unchanged at +15.40 and +12.40 respectively. This morning the macro is mixed with crude slightly lower, grains/soya mixed and the USD Index lower while the BRL ended firmer at 5.17. The market appears unsure of its next move. The strength of the spot month over the rest of the board continues to suggest the flat price could improve again. The H-23 options expiry is tomorrow with the largest OI in the 20.50 and 22 cents calls with minimal OI inputs. While it would seem unlikely prices will drop back towards 20.50 in the short term a test of the 22 cent level cannot be ruled out.