Sugar Market Report for 26 April

Good morning,

Friday saw the market continue to consolidate at the top of its recent range with prices ending barely changed although the trading volume was limited as traders await fresh news. The market opened around unchanged but with no follow-through buying from the previous firm close prices dropped away to hit the lows of the day after an hour of trading. However, prices soon started to improve throughout the rest of the morning and hit the day’s highs as US traders got to their desks. A double top was formed at 17.05 as the highs of the previous session were unable to be bettered and prices soon fell away on some light day-trader liquidation. Another attempt to push higher failed which saw prices then slip back to settle around unchanged. The KN lost 1 point to end at +3 while the NV lost 4 points to end at +8. The OI in K-21 dropped to 60,017 lots with another 26.5k lots traded on the day suggesting OI is now below 50k lots with 5 trading sessions until expiry on Friday. In London The QV did improve marginally to settle at +5.20 while the VZ also improved from a discount to a small premium of +0.20. However, London lost ground against NY meaning the WP slipped again with the NQ dropping nearly $2 to finish at 83.90 while the VV dropped nearly $4 to end the day at 85.40. Traders are nervous and probably slightly confused with direction. While the flat price remains firm and near 7 week highs the structure continues to weaken slightly and the WP is dropping away. The funds continue to underpin the market but the fundamental picture is more unclear. Dry weather continues across Brazil’s CS but the continuing pandemic causing havoc across many countries is weighing on consumption.

As expected the funds increased their long position substantially according to the COT. As of the 20^th April the funds/specs increased their net long position by a massive 50,366 to 220,078. This increase was expected given prices increased by 130 points during the reporting period. The non-commercials increased their net longs by 42,304 to 160,041 their largest net long since the middle of January. Given prices have improved another 25 points since it is likely there are running at around 180k lots net long. The commercials increased their net short position by a huge 60,197 to 454,556 as the trade liquidated over 80k lots of longs while the shorts also covered probably due to the up-coming K-21 expiry. The Index funds increased their net longs by 9,831 to 234,479 as they bought afresh and covered shorts.

Brazil’s CS remains dry. Czarnikow said in a research report that it has been the driest April in a decade with rains 70% below average and they could soon cut their cane crush total for the season from their previous estimate of 580 million tonnes. The 10 day forecast sees only minimal scattered showers.

This morning the market opened unchanged before slipping 12 points. Currently, prices have recovered slightly holding at around 7-8 lower. The KN is 1 point firmer at +4 while the NV is unchanged at +8. In early London trading the QV is slightly weaker at around +4.80 while the VZ is valued around flat. The macro is mixed this morning with crude lower and the USD index slightly weaker while grains are firmer. The market remains very firm and it would seem unlikely prices will drop away too much at the moment with the double top at 17.05 looking likely to be tested and broken before too long. While the funds have increased their long substantially recently they still have the ability to buy considerably more. The Unica data for first half of April is eagerly awaited by traders and should be released early this week and will give traders some idea on how the harvest is starting.