Sugar Market Report for 18 November

The market dropped over 50 points yesterday on the expected correction after the near 300 point rally higher. The market opened 16 points lower (leaving a 2 point chart gap) probably on the basis the market had closed slightly lower on the previous session and macro considerations. The market continued to weaken throughout the morning although some support was found below 19.90. However, there was no real improvement seen and prices continued to weaken going into the close with the market settling just 5 points off the lows and whipping out the previous two day’s gains. The HK also saw a bout of profit taking dropping 10 points to end at +111. The KN was also 6 points weaker at +72. In London, the HK improved marginally to +8.10 while the KQ slipped slightly to +17.30. This meant the HH WP improved to 98.40 but the KK dropped over $2 to end at 114.80. A sharp correction was always on the cards after such a rapid rise in prices and it now remains to be seen whether the market can make a recovery or slide further. The funds are now unlikely to add to their longs but probably will not bail out yet.

The Indian Sugar Mills Association (ISMA) reported yesterday that India produced a total of 2 million tonnes of sugar during the first month and half of the harvest which officially started on the 1st October. Although around the same amount produced this time last year it was a solid start and bodes well for the rest of the harvest especially as it was a slow start in some regions due to above rains in October which extended the monsoon. It would suggest that India could produce another 5-6 million tonnes over the next 4 month before reaching the peak of the harvest in March. The confirmation of a good start to the crush may have also suggested more raw sugar could be available for export than previously estimated which lead to the recent rally.

This morning the market gapped lower opening 13 points weaker on some early market selling. However, the chart gap was soon filled. Currently, prices are back to unchanged. So far the HK and KN are unchanged at +111 and +72 respectively. In early London trading, the HK and KQ are around unchanged at +8.20 and +17.40 respectively. The macro is mixed so far this morning with crude slightly firmer and other commodities mixed while the USD Index is virtually unchanged. The BRL ended weaker again yesterday against the USD ending at 5.405. The market continues to correct and could drop further without a serious deterioration in the technical picture. Tonight’s COT will be interesting as it will give a close indication to the funds net long position. The downside target is, probably, the previous double top at 19.43 especially as there is also a 1 point chart gap there as well. If it breaks that level then a drop to 19.00 cents may be seen. Prices could improve as the overall momentum has not been lost as yet although it is unlikely the funds will increase their longs substantially unless prices improve back to the highs.