Sugar Market Report for 20 April

The market made a new 11 year high yesterday before falling back to settle lower as the structure also weakened. The market opened 8 points weaker but soon started to improve swiftly getting back to unchanged. Prices dipped slightly mid-morning but started to improve again around mid-day eventually hitting a new high of 24.90. The buying soon dried up which, ultimately, saw some light profit taking which soon turned into rather more aggressive liquidation with prices dropping 50 points in under 90 minutes with a sell stop triggered at 24.50. The inevitable bounce saw prices improve over 30 points before falling back to settle near the lows of the day. The KN tumbled mainly as the flat price dropped. It lost 8 points on the day to settle at +52 having now given back all the gains of last week. The NV also lost 3 points to end at +33 but continues to remain within the range seen this month. In London it was a rather different story with the flat price remaining in the plus column albeit at the bottom of the day’s range. The structure also remains more resilient with the QV and VZ both ending firmer at +16.20 and +15.30 respectively. This meant the WP also saw good gains with the VV WP up over $4 at 144.70 and the VZ WP at 129.40. The previous strong close suggested the recent highs would be tested which turned out to be the case although few would have expected the subsequent 60 point drop back. In hindsight, the market had become technically over-bought and with the funds continuing to be reluctant to add to longs significantly it may not have been much of a surprise that the early gains were not maintained especially as the macro turned negative.

While the market has rallied recently on dropping production estimates from India and Thailand many believe Brazil can fill these drops. However, it has been a sticky start with rain preventing mills getting going across the CS. However, the situation is improving as drier weather moves in. Still some showers over the next few days which may hamper field operations but by the end of the month it looks to become more settled and dry which should allow the crush to get into top gear.

This morning the market opened 11 points weaker mainly on some follow through selling from the relatively weaker performance yesterday and a negative macro picture this morning. Currently, prices are back at unchanged. The KN is 4 points better at +56 while the NV is unchanged at +30. In early London trading the QV is firmer at +17.00 while the VZ is also firmer at +15.80. As mentioned the macro is negative again this morning with majority of commodities trending lower while the USD Index is unchanged. The BRL weakened yesterday to end at 5.06. The market may see a further drop in price but any wholesale sell-off would seem unlikely, especially with the K-23 expiry just over a week away. The OI in K-23 is relatively low with 7 trading sessions to go. The OI dropped to 105,649 as of COB 18th April with another 35,936 lots traded yesterday. Therefore, a relatively small delivery looks likely which should be the case given the nearby physical supply tightness. While the funds seem happy to remain long sitting on a whopping profit after buying well below current levels and receiving good premium for past two rolls they may want to trim a little and this selling might be triggered if prices breach the double bottom at 23.47 (basis N-23). However, the trade longs in K-23 are still looking to squeeze out any remaining shorts who cannot deliver or end users who need to price so another push higher is still on the cards.