Sugar Market Report
The market improved yet again on Friday although the rate of increase is slowing as more producer selling is found and the funds buying is dropping. The total volume was, again, poor at just over 96k lots. The market had opened 2 points weaker and remained in the negative column until early afternoon hitting the day’s lows as US traders got to their desks. However, prices soon pulled off the lows as light fund buying appeared which saw prices eventually push up above unchanged. Prices remained either side of unchanged until late in the session when another bout of fund buying took prices to a new high. The market did dip in late trading but the front month still ended at a new high of the move. The HK improved another 7 points to end at +50 as concerns build over potential tightness of raws during the first quarter next year. The KN also improved 3 points to settle at +40. In London the ZH dropped to -2.70 while the HK was a tad firmer at +0.20. The ZH WP slipped $2 to end at 71.20 while the HH WP was also weaker at 74.00 suggesting no particular tightness in white sugar in the next few months. The recent fund buying seen in sugar is reflected across the entire agricultural commodities spectrum suggesting it is not just sugar fundamentals driving the fund buying.
Unica released their harvest date for second half of September late Friday and after the market close. It showed the cane crush for the period was 40.224 million tonnes and sugar production at 2.868 million tonnes with a 46.37% sugar split. This was a little lower than some expectations but still an impressive 31.95 million tonnes of sugar for the season. Unica did suggest the dry weather is beginning to impact on agricultural yields. However, it has been raining over the past couple of days across the CS and will continue, on and off, for the next 10 days. While this might hamper the current harvest it will be seen a beneficial for the next.
The COT as of the 6th October showed that the funds/specs had increased their net long position by 18,908 to 219,813. The non-commercials increased their net long position by 14,288 to 173,226 their largest long position for several years. They have bought more since the report and probably, currently, stand around 185k lots net long. Although they have built larger position in the past their gross long is now over 40% of the total open interest which may deter them from adding to their positions significantly. The commercials increased their net short position by 25,630 to 477,153 although general cutting of positions was seen by the trade both long and short. The Index funds increased their net long position by 6,722 to 257,340.
This morning the market opened 5 points firmer before gaining another 5 points on some early market on opening buying thereby establishing a new high for the recent move. Prices have slipped back and are, currently, 4-5 points firmer. The HK and KN are unchanged at +50 and +40 respectively. In London it is a quiet start to the week. The ZH is a tad weaker at -2.90 while the HK is unchanged at +0.20. The macro is mixed this morning with crude lower while agricultural commodities are, generally, higher. The USD is unchanged. The market continues to remain firm with further gains looking likely. However, it is difficult to justify a significant move higher from current levels although the positive technical picture will add support. For the time being any correction might be seen as an opportunity to buy.
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg
Phone: +44(0) 207 716 8598
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