Sugar Market Report for 23 May

Good morning,

The market continued to consolidate at the top end of the recent range on Friday although the trading volume was particularly poor at just over 79k lots. The market had opened 5 points firmer before immediately improving another 12 points. Over the next hour the market remained firmer but encountered resistance at 20 cents. This eventually saw a bout of long liquidation which took prices down to the lows of the day and into the negative column. However, prices soon started to recover with the 20 cent level soon breached which encouraged further buying. The market hit the highs of the day mid-afternoon before swiftly falling back to around the opening levels. A small bounce was seen prior to the close for the market to close around the middle of the range for the day. The NV was 1 point firmer ending at -12 while the VH was also 1 point stronger at -20. In London the structure strengthened further with the QV ending at +16.50 and the VZ at +6.10. This meant the WP also improved with the VV WP ending at 99.10 and the VZ at 93.00. The market remained firm as concerns over Brazilian CS output remain upmost in traders minds. Cold weather across Sao Paulo region also added to the positive sentiment although any frosts were light as to be expected at this time of year.

The COT as of the 17th May showed the funds/specs had increased their net long position by 36,950 to 129,187. This was during a volatile week when prices dropped to two month lows of 18.30 before rallying 194 points to 20.24 so the increase in the speculative position will come as no surprise. The non-commercials increased their net longs by 22,210 to 81,034 as gross longs were added while gross shorts were cut. The commercials saw their net short position increase by 34,731 to 371,650 as both end users and producer pricing was noted presumably at the beginning and end of the reporting period respectively. The index funds saw their net long position cut by 2,219 to 242,464.

The Egyptian agricultural ministry announced on Saturday that they expect total sugar production for this year to reach 2.8 million tonnes some 200k tonnes less than last year. However, the country expects to achieve self-sufficiency in sugar by next year.

This morning the market opened 10 points higher mainly on a stronger macro picture. Currently, prices remain 10 points higher. The NV and VH are unchanged at -12 and -20 respectively. In early London trading the QV is unchanged at +16.50 while the VZ is a tad firmer at +6.40. As mentioned the macro is a generally positive picture with crude and most other commodities higher while the USD Index has taken another dive and is now some 2.3% off the highs reached on the 13th May. The market looks set to remain firm as the macro is supportive and concerns over sugar production in Brazil remain upmost in traders minds. Unica data for 1st half of May should be released this week which will give further indication on the situation.




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