Sugar Market Report for 6 February

Friday saw not only the flat prices drop but the structure in both NY and London weakened. The market had opened 3 points firmer with the high of the day posted within the first few seconds of the session as prices soon weakened. There was a brief recovery but prices never got back into the plus column. Thereon in the market continued to weaken throughout the session with a couple of sell-stops triggered as 21.50 was breached. Support only appeared below 21.20 with a small bounce at the end of the day on some late short covering in front of the weekend. The HK slipped 2 points to +125 while the KN lost 8 points to end at +71 its weakest in six sessions. In London the spot month took a battering as the HK dropped to a discount for the first time. It settled at -4.00 having dropped over $13 in the past 10 sessions and over $30 since it hit its highs back in late December. The weakness had a knock on effect on the rest of the board with the KQ losing $1.50 to settle at +12.50 its weakest since early November. This meant the WP weakened with the HH WP ending at 83.00 and the Kk WP at 112.60. NY reversed direction again on Friday wiping out all the gains of the previous 3 sessions to form a double bottom at 21.17/21.18. The weakening of the structure in both markets does, perhaps, suggest a sea-change as continuing expectations of higher production and less demand than some had anticipated. While the funds have dictated flat price direction recently it would seem the recent drop is not only a correction from an over-bought situation but a view that prices may be over-valued.

Limited fresh news around. The CFTC announced on Friday that they would not publish the weekly COT report due to the cyber-related incident at ION cleared derivatives which has impaired some clearers of the ability to provide up to date information. No date has been given for the release of the report with the CFTC saying it would only be published once all data has been reported.

The United Nations food agency’s world price index fell in January for the 10th consecutive month and is now down some 18% from the record high reached last March following Russia’s invasion of Ukraine. Falls in the price of vegetable oils, dairy and, surprisingly, sugar helped the drop as cereals and meat remained mainly unchanged.

This morning the market opened 1 point firmer, slipped slightly before recovering but volume is thin so far. Currently, the market is 8 points firmer. The HK is 1 point firmer at +126 while the KN is unchanged at +79. In early London trading the HK is slightly weaker at -4.40 while the KQ is virtually unchanged at +12.40. The macro is mixed this morning with crude slightly higher, grains/Soya around unchanged while the USD Index is firmer again after its big gains on Friday. The BRL weakened against the USD on Friday ending at 5.133. Today’s action may be pivotal as to the direction the market now takes. The funds are still heavily long and unlikely to add unless prices get back towards 22 cents. The continuing weakening of the structure in London may point to adequate white sugar supplies. The OI in London H-23 dropped to 21,425 with another 8,764 lots traded on Friday. Some believe the OI will be minimal by expiry and that India may be the only deliverer. There is now a triple bottom at 21.17/18 which, if breached, may trigger further liquidation. Conversely, it could be seen as a short term low which may encourage speculative short covering.