Sugar Market Report for 4 October

Good morning,

The marker was in a very much post-expiry mood on Friday with trading volume under 78k lots. The market failed to seriously test the recent high and ended down on the day and back in the middle of the recent range. The market had opened 3-4 points weaker but did mange to get into the plus column albeit by one point and only momentarily. Prices soon started to slip back. Initially, some support was found around unchanged but by mid-morning prices started to tumble losing just under 30 points before some support was found just above 20 cents. This encouraged some light short covering which saw prices improve but prices sagged again on the close with some market on close selling taking prices back to the lows of the day losing some 15 points during the settlement period. The HK lost 5 points to end at +53 while the KN weakened by 7 points to settle at +62. In London the structure continued to slowly improve with the ZH ending at -1.70 while the HK was nearly $3 firmer at +6.40. The WP was mixed with the HH WP up a little at 70.30 while the KK WP was slightly weaker 75.60. After the strong performance the previous session many thought some follow-through buying could see the recent top end of the range broken. In the event the buying never appeared with the inevitable drop back into the range. As mentioned the trading volume was very poor with limited interest for any quarter.

The ICE exchange confirmed the delivery of 4,441 lots (225,600 tonnes) with Louis Dreyfus the only receiver. Wilmar and Viterra were the two deliverers. 3,889 lots were delivered from Paranagua, Brazil, 355 lots from Mexico and 197 lots from Guatemala. The small delivery contrasts dramatically with the 52k lots delivered in October 2020 – the largest delivery on any ICE contract.

The COT report as of the 28^th September showed the funds/specs had increased their net long position by 2,115 to 206,541. The non-commercials were particularly quiet increasing their net longs by just 137 to 163,298. Their lack of interest was probably due to the fact the market remains very range-bound. During the reporting period prices tested the top end of the range reaching 20.34 before falling back into the bottom end of the range at 19.45. The commercials cut their net short position by just 338 to 398,802 with large liquidation and short covering by trade probably a consequence of the V-21 expiry. The Index funds cut their net long position by 2,453 to 192,262.

This morning the market opened 3 points weaker before dropping another 23 points on market on opening selling some probably on stop. Prices swiftly pulled off these lows and are, currently, trading 9-10 points weaker. The early drop has filled the chart gap on the first month continuous after the V-21 expiry last week (19.93). The HK is 1 point weaker at +52 while the KN is a couple of points firmer at +64. In early London trading the ZH is around unchanged at -1.60 while the HK is weaker at +5.10. The macro is negative this morning with most commodities marginally lower. The USD Index is also slightly lower at 94.00 after hitting its highest level since September 2020 last week. The news that shares in the Chinese property company Evergrande have been suspended awaiting a company statement has weighed on the markets. It is thought another property firm may buy a majority stake in Evergrande. The sugar market seems happy to remain range bound for the time being. Prices have now slipped back into the middle of the range seen since nearly a month ago. While the funds remain side-lined it would seem prices will remain within this range. Physical demand remains very poor and, for the time being, is countering the concerns over Brazilian CS sugar production.