Written Commentary
Good morning,
The market improved again on Friday recovering most of the losses after the mid-week sell-off. However, the trading volume was thin. The market had opened 1 point better but soon improved further on some light speculative buying. Prices climbed further to, momentarily, push above 13.50 only to take a tumble to the lows of the day shortly after on some market selling. However this selling soon dried up with prices improving back to 13.50 where resistance kept prices in a narrow range until the close when some late fund buying saw prices improve again to close at the highs of the day and slightly higher on the week. The VH ended 2 points firmer at -51 while the HK was 3 points stronger ending at +25. In London was quiet again with the ZH ending at flat again while the HK was a tad weaker at -1.50. This put the ZH and HH WP stronger at 78.70. Another positive performance although, as mentioned, the volume was limited at just over 128k lots. The funds continue to buy (see COT below) not only sugar but are long of most agricultural commodities as they continue to take a more positive view.
The COT, as of the 22nd September, showed the funds/specs had increased their net long position by a large 35,437 to 179,279. The non-commercials increased their net longs to 144,548 an increase of 32,058 on the week prices improved nearly 100 points. They have undoubtable bought more since the report and maybe now close to 200k lots net long. The commercials increased their net short position by 32,204 to 431,092 as trade liquidated longs as prices improved. There was very limited evidence of any producer selling which has exaggerated the move. The index funds cut their net longs by 3,234 to 251,814.
It is reported that the Indian government has given an additional three months for millers to undertake mandatory export of their sugar quota for the 2019/20 season. Out of the 6 million tonnes of exports about 5.6 million tonnes have been moved from the mills. Difficulties in exporting due to Covid restrictions is the main reason the extension until the end of December.
This morning the market opened 4 points better before slipping back to currently remain at 1 point better. The VH and HK are unchanged at -51 and +25 respectively. It is a very quiet opening in London with the ZH at +0.10 and the HK a tad better at +1.90. This morning the macro is mixed with equities better while crude is slightly weaker while the USD is unchanged. The BRL ended the week lower at 5.56. The funds look likely to continue to increase their net longs so further gains seem likely although some produce selling likely to be seen if prices do improve another 20-30 points. The V-20 expiries on Wednesday. The OI as of Thursday close was 77,610 lots with another 36,500 lots traded on Friday. Therefore, a relatively large delivery looks to be on the cards with Brazil the main origin. The usual debate will be held on whether a large delivery is bullish or bearish but probably something the funds will see irrelevant.
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg
Phone: +44(0) 207 716 8598
Email: admisi.sugar@admisi.com
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