Sugar Market Report for 15 November

The market improved again yesterday reaching its highest level since 24th May as the funds continued to buy. The market had opened 5 points lower before slowly edging lower to reach 19.50 by mid-day. However, as has been seen recently prices started to improve as US traders got to their desks with the market gaining 48 points over the next three hours to top out at just below 20 cents. With heavy selling noted above this level prices eased back on some speculative long liquidation to settle 15 points off the highs. The trading volume dropped yesterday which might suggest the fund buying is easing. However, the structure remains firm with the HK ending unchanged at +104 while the KN was 1 point firmer at +72. In London, the ZH improved to +30.00 as the Z-22 expires today. The OI dropped to 12,258 lots with another 5,144 lots traded yesterday still suggesting around 500k tonnes being delivered. The HK eased slightly to finish at +9.00. This meant the HH WP eased to 101.30 while the KK WP ended at 115.20. The market remains very firm although many are scratting their heads as to why prices nearly hit 20 cents yesterday. There has been some chatter about Indian sugar mills defaulting over previously agreed sales made at much lower levels but it is thought the majority have been re-negotiated. The funds now appear to be the main buyer and have probably built a sizable position now.

The COT report, delayed for a day due to US holiday on Friday, showed that, as of the 8th November, the funds/specs had increased their net long position by 25,455 to 44,185. This was during a period when the market rallied 57 points so the increase will not have been any great surprise. The non-commercials moved from slightly short to 12,524 net long during the period as the gross shorts, added when prices dropped to 17.55, covered. Since the report prices have rallied another 98 points so the funds are currently, possibly, around 50k lots net long. The commercials increased their net shorts by 42,245 to 241,244 with a large increase in the gross shorts suggesting good producer pricing. The Index funds increased their net longs by 16,790 to 197,059.

This morning the market opened 3 points firmer before improving another couple of points. Currently, prices are 2 points firmer. The HK is 4 points firmer at +108 while the KN is 2 points stronger at +74. In early London trading, the ZH is weaker at +28.10 while the HK is around unchanged at +9.10. The macro is mixed this morning with the USD Index lower while crude is also weaker and grains/soya mixed. The market shows no signs of weakening at the moment and a test of 20 cents could be seen. However, the market is now over-bought so a correction could be seen before long. Additionally, there seems little reason for the market to improve too much more from a fundamental basis but the structure remains very firm so a collapse in prices would seem unlikely. Z-22 expiry today may see some volatility in the front month as the trading volume dries up.