Sugar Market Report for 19 December

Friday saw some consolidation after the volatility of the previous session. Nevertheless, another 50 points range was seen as the market settled at its highest level since the middle of November. The market had opened 10 points lower with some follow-through selling after the collapse in prices the previous session. Prices quickly dipped to the lows of the day with prices soon recovering after the initial selling was completed. The market remains quiet and in a narrow-range for much of the morning before picking up as US traders got to their desks. Fresh buying saw prices push up to the highs of the day mid-afternoon before a bout of day-traders liquidation took prices back to 20 cents. The market improved again coming into the close although some late liquidation saw the market ease down on the close. Yet, it was a positive performance especially as the structure continued to strengthen. The HK gained 7 points to finish at +127 while the KN was up 5 ending at +83. In London, it was a similar story with HK slightly firmer at +15.20 as was the KQ ending at +18.20. The WP was mixed with HH WP slightly weaker at 103.90 while the KK WP was a tad firmer at 116.70 but there was little interest at current levels. It was another strong performance with a strong close on day and week as the structure continues very firm.

ISMA announced this morning that Indian sugar production up until the 15th December reached 8.2 million tonnes nearly 5% higher than the same time last year. This seems to be contradictory to earlier stories that Indian production may fall around 7% due to erratic weather and more being diverted to ethanol production. If this increase remains to the end of the season then total production could be over 37 million tonnes. There is a long way to go but this increase year-on-year may be enough to persuade the Indian Government to announce further export allowances in January.

The COT, as of the 13th December showed that the funds/specs had increased their net longs by 1,137 to 162,200. However, the non-commercials increased their net longs by 8,707 to 127,409 as prices improved by around 40 points during the reporting period. Given prices then rallied another 97 points it is likely the funds have increased their net long further and could now be around 150k net long which may be their limit in this market. The commercials cut their net short position by a minimal 128 to 361,429 as the trade were seen on both sides of the market. The Index funds cut their net long position by 1,264 to 199,228.

This morning the market saw a volatile opening. Started unchanged before rallying 9 points only to drop back into the negative column before improving again. Currently, prices are 2 points stronger. The HK is unchanged at +127 while the KN is 1 point weaker at +82. In early London trading, the HK is firmer at +16.90 as is the KQ at +18.50. This morning the macro is mixed with crude around unchanged, grains/soya mixed and the USD Index weaker at just below 104.00. The BRL ended the week around unchanged at 5.30 on Friday. News that Indian sugar production is up year on year probably will not have too much impact on nearby prices as it will continue to be seen that there is still not enough raw sugar available to satisfy demand in the short term. Nevertheless, the upside is probably limited as the funds have now a sizable long position which they are unlikely to increase. However, any collapse in prices would seem unlikely while the structure remains so firm. The funds have proved they are happy to hold longs down to, at least, 19.20 and the trade appear reluctant to fresh sell into the market at the moment.