Sugar Market Report for 24 October

Good morning,

The market dropped again on Friday to its lowest level since 6th October but regained virtually all the losses by the close. However, the trading volume was pretty meagre only reaching just over 58k lots. The market had opened 1 point lower before immediately dropping another 13 points in the first10 minutes of trading to hit the lows of the day. As the early selling dried up prices started to improve gaining over 30 points by the time US traders were at their desks. Prices slipped away again during the remainder of the afternoon although some late short covering saw prices improve into the close with the market ending just below unchanged. The HK gained 1 point to end at +90 while the KN was also 1 point firmer at +43. In London, after 3 sessions of dropping prices and weakening structure some buying emerged to bolster prices to a certain extent. The ZH was slightly firmer at +32.60 as was the HK at +9.20. The gains in London’s flat price saw the WP improve with the ZH and HH WP finishing over $5 firmer at 127.80 and 95.20 respectively. However, interest was limited with no WP block trades. The marginal recovery of prices will not be seen as any great turnaround although the very thin volume suggests limited interest at current levels. Whether this means prices have to fall further to find volume or might recover to find volume above the market remains to be seen. The lack of fresh fundamental news is not helping the situation. Chatter on Friday that the Indian Government’s export policy for the season was imminent turned out to be incorrect and it would seem unlikely any announcement will be forthcoming until after Diwali. Unica should also release their harvest data for the first half of October sometime this week which should show an improvement on the last report but probably not significantly.

The COT report as of the 18th October saw the funds/specs increase their net long position by 30,792 to 77,216. An increase was expected as prices did hit two month highs during the reporting period. The non-commercial increased their net longs by 26,584 to 39,607. Since then prices have dropped away and the short term funds may have cut some longs so, perhaps, funds are running around 20k lots net long which is a fairly neutral position. The commercials increased their net short by 32,384 as producer selling was noted after prices pushed above 18.80. Some trade long liquidation was also seen. The Index funds increased their net long position by 1,591 to 195,999.

This morning the market opened 6 points lower before swiftly falling further on a lower crude quote making a new low for the recent move. Currently, prices are 16 points lower. The HK is 1 point weaker at +89 while the KN is 2 points firmer at +45. In early London trading the ZH is $1 lower at +31.60 while the HK is virtually unchanged at +9.40. This morning the macro is slightly negative with crude and grains/soya lower while the USD Index is around unchanged having taken a tumble on Friday. The BRL improved Friday as the USD weakened to end the week at 5.1635 its highest level since the 4th October. The market continues to wait for Indian export news and Unica data so for the time being the market remains beholden to the macro. However, with trading volume remaining thin volatility could increase especially if the funds decide to exit their recently acquired longs. Support looks likely only to be found at 18 cents and below.