Sugar Market Report for 18 April

The NY market improved yesterday to settle at a new contract high as K-23 option expired. However, London failed to make the same gains after the expiry of K-23 on Friday. The market had opened 15 points firmer before immediately jumping another 25 points in a particularly volatile opening 5 minutes of trading. The limited amount of fund buying in the latest COT report may have been a contributing factor suggesting the funds have ample opportunity to add. Prices soon eased back to the opening levels and then remained within a wide 35 point range for the rest of the day in volatile trading. The expiry of the K-23 option seemed to keep prices within the 24.25 – 24.50 strikes through to the close. The KN slipped 1 point to end at +64 while the NV was 5 points firmer at +35. In London it was less volatile as the K-23 expiry delivery details were absorbed. It would seem the delivery was seen as slightly bearish dipping after the delivery information was released by the ICE exchange (see below). The QV dropped to +14.20 while the VZ was also weaker at +12.70. This meant the WP also slipped with VV WP at 137.30 and the VZ WP at 124.60. NY remains very firm with the bulls remaining in charge. However, the latest COT report does suggest while the funds are happy to hold longs they are reluctant to increase significantly which might suggest they see limited up-side potential from current levels. Nevertheless, there also appears a view that the end users are still under-priced and will buy on any weakness in the short term.

The K-23 London expiry saw a total of 242,550 tonnes (4,851 lots) delivered. Man and Sucden the two receivers with six deliverers. The largest was Wilmar followed by Parry, Al Khaleej and Tereos. Czarnikow, Raizen and Viterra made up the balance. Largest origin was India (3,521 lots) followed by Brazil, Thailand and UAE. While the delivery was smaller than some had expected there was some head-scratching as to the fact that the tape had attracted sugars from India, UEA and Thailand given the supposed very tight physical availability and may indicate a slight drop in demand.

This morning the market opened unchanged before dropping lower. Currently, prices are 10 points weaker. The KN is unchanged at +64 while the NV is 1 point weaker at +34. In early London trading the QV is a tad firmer at +14.50 as is the VZ at +13.30. The macro is positive this morning with USD index weaker while most commodity markets are higher. The sugar market looks as if it may be at a crossroads. Can it push higher to 25 cents last reached back in March 2012 or start to fall back? The funds seem happy to hold their longs but not to extend further. Much will depend on how much further end-user pricing has to be done against K-23. With the Brazilian CS harvest cranking up into top gear there may be a question mark on the appetite to take delivery.