Sugar Market Report for 2 May

Despite a shortened session due to London being closed, the market took a large tumble falling over 3% wiping out the gains of the three previous sessions when new 11 year highs were hit. The market had opened 4 points higher but immediately collapsed 35 points before improving 25 points all in the space of the first two minutes of trading. Further buying over the next 90 minutes saw prices improve further to hit the highs of the day but could not break through the highs of the previous session. This soon triggered some more aggressive long liquidation which saw prices slump 105 points to the lows of the day over the next three hours. Eventually, the selling was exhausted and this triggered some light short covering which saw prices improve by 30 points before slipping lower coming into the close with the market settling 11 points off the lows. The NV lost 5 points to settle at +29 while the VH was also 5 points weaker ending at +40. The correction seen yesterday has been on the cards for several sessions and with the expiry of the K-23 it was a time for traders to assess their positions. The early failure to break above Friday’s highs was possibly the catalyst along with the fact that Cofco was the largest deliver of raw sugar against the K-23 contract. However, the market still remains near to the 11 year highs. Much depends on the action over the coming days as to whether the highs are in place for the time being.

The K-23 expiry saw 18,494 lots (940k tonnes) of raw sugar delivered. The main deliverer was Cofco with the majority of the sugar coming out of Brazil. 193 lots were delivered from Honduras. The main receiver was Wilmar (12,223 lots) and Louis Dreyfus (6,271 lots). Some will see the delivery as bearish given the amount delivered was rather higher than some has expected given the perceived tightness in the raw sugar market and the fact that Cofco delivered suggesting Chinese buying may be limited given the current very high prices.

The COT as of the 25th April showed the funds/specs had increased their net longs by 3,383 to 217,907 during a period that the market improved 228 points. The non-commercial increased their net longs by 4,818 to 162,565. This modest gain was in line with the fund activity over the past few weeks who have, in the main, been just riding the wave but not increasing net longs. The commercials increased their net shorts by 6,182 to 378,541 as end-users priced against trade and producer selling. The Index funds increased their net longs by 2,798 to 160,635.

This morning the market opened 4 points weaker before improving.

The NV is unchanged at +29 while the VH is 1 point better at +41. In early London trading it is somewhat of a catchup after NY’s big drop yesterday. The QV is $1 lower at +8.90 while the VZ is now at a two month low of +8.60. This morning the macro is a positive picture with crude and grains/soya higher while the USD Index is lower while the BRL ended at 4.99 yesterday. There is no significant change in the fundamental picture but with over 900k tonnes being delivered against K-23 by Cofco does suggest demand from the likes of China may be limited at current price levels. Prices may correct further and it would not take too much for the technical picture to turn negative. A settlement below 25.10 might change sentiment.