Sugar Market Report for 9 January

The market made another leg lower on Friday hitting its lowest level since 9th November and ending over 220 points off the highs hit in late December and below 19.00 for the first time since the first week of November. The market had opened 4 points firmer but that soon turned out to be the highs of the day as prices immediately started to fall. Some support was, initially, found just below 19.30 but as US traders got to their desks more selling appeared. There was a brief jump in prices back to the morning lows but this was very short lived with the downward trend soon prevailing again. It was one way traffic until the close with the market, eventually, falling through 19.00 cents. Persistent selling ensured the market settled near the lows of the day. The main driver was heavy fund selling as they covered longs with much more urgency as prices drop below their average purchase price. The trading volume was good at over 167k lots. The HK continued to weaken as the flat price collapses. The HK lost another 8 points to end at +105 nearly 50 points off the highs hit just before Christmas. The KN also lost 5 points to end at +57 over 50 points off the highs. In London, the HK slipped to +13.40 while the KQ ended a tad weaker at +15.60. However, the WP finished slightly firmer at 109.20 for the HH WP and 119.00 for KK WP. It was all about the funds again as they continued to liquidate longs which they bought during November and then again from the middle of December. As was the case when they established their longs position when limited producer selling was encountered there has been only limited scale down buying noted although there were signs it was building on Friday as prices dropped again. The weakness bucked the trend of the wider macro picture which was positive on Friday as the USD dropped on better than expected employment data.

The COT, as of the 3rd January showed the funds/specs had cut their net long position by 21,280 to 202,310 during the period that saw prices drop 68 points. It does emphasise that the funds had not started to liquidate in any volume despite the drop in price. The non-commercials cut their net longs by 16,358 to 157,992 but have, obviously, covered significantly more since. It is likely the funds are now around 100k lots net long. The commercials cut their net shorts by 13,025 to 395,997 as the funds covered shorts although there was little evidence of any heavy end user pricing. However, it does seem odd that the commercials net short position dropped after the funds liquidated longs. The Index funds increased their net long position by a marginal 168 to 193,687.

This morning the market opened 6 points higher but soon fell back and is, currently, unchanged having made a new low for the move at 18.92. The HK is 2 points weaker at +103 while the KN is unchanged at +62. In early London trading, the HK is $1 firmer at +14.40 while the KQ is unchanged at +15.60. The macro is a positive picture this morning with crude higher and the USD Index lower. The news that the Brazilian right-wing supporters of ex-President Bolsonaro had stormed Congress and the Supreme Court yesterday is likely to have an impact on the BRL which closed firmer on Friday at 5.22. Additional news that a grain vessel had run aground in the Suez canal had some impact on the market earlier this morning but latest news is that the vessel has been re-floated. The market looks set to remain under pressure with the funds forced into liquidate more longs. Technically, there should be some support found around the lows of Friday which was the highs seen back in October and there was some buying appearing from end-user buying on Friday. Nevertheless, despite the structure weakening over the past fortnight it still remains strong. Further fund liquidation could see prices drop down to around 18.50 but that may be the bottom of the drop. A correction may be seen back to 19.50 but there seems little reason to improve to over 20 cents again.