Sugar Market Report for 14 November

The market pushed higher again on Friday reaching its highest level since 10th June as the funds continued to buy. However, prices did drop back to settle in the middle of the day’s range but still well up on the day. The market had opened 4-5 points firmer before gaining another 11 points over the next 10 minutes. The market then remained in a narrow 7 point range for the rest of the morning. However, as US traders got to their desks prices started to improve again jumping to the day’s highs before swiftly falling away. By the close prices had given back the gains seen earlier in the afternoon. Further speculative long liquidation during post-settlement trading saw prices slip another 4 points. The HK improved again to end at +104 while the KN ended unchanged at +71. In London the soon to expire Z-22 contract remained firm with the ZH gaining $3 to finish at +27.80. The OI in Z-22 dropped to 13,078 with another 5,174 lots traded on Friday. It continues to look as if around 500k tonnes will be delivered. The HK ended unchanged at +10.10. This meant the ZH WP strengthened to 133.50 while the HH WP was also a little firmer at 105.70. The market remains very firm having gained over 230 points since the end of October. It is difficult to justify the whole move apart from good fund buying into limited producer selling. There has been some chatter regarding Indian defaults on sugar sold before the government’s export policy with some getting caught out of the currency hedge.

There is no COT until tonight due to the US holiday on Friday. However, it is interesting to note that the OI in NY has increased by over 50k lots since the beginning of the month suggesting the funds have built a net long position of probably over 50k lots. While they have the ammunition to buy more they have been content with a similar sized position for the past 18 months so may not be inclined to add more longs especially as the market settled some 21 points off the highs. The producers have taken to opportunity to price on the rally but much was seen further down to board – hence the increasing HK premium. Indian selling has been seen against H-22 and will continue if prices push to new highs.

This morning the market opened 5 points lower before dropping another 5 points before regaining all the losses within the first minute of trading. Currently, prices have fallen back and are 5 points weaker. The HK and KN are both 1 point firmer at +105 and +72 respectively. In early London trading, some aggressive selling of the ZH sees it drop over $6 to +21.10 while the HK is slightly lower at +9.90. The macro is mainly a negative picture with most commodities trending lower while the USD index is firmer but remains well down compared with a week ago. The market still looks firm and may push back towards the highs seen on Friday but there would seem little reason for prices to improve much more despite the strength of the structure. However, the funds may have a different view.