Sugar Market Report for 24 April

The long awaited correction was seen Friday but not before a new high was posted on the opening as more short covering was seen after the huge gains of the previous session. The market had an explosive opening with prices opening 37 points higher. This soon turned out to be the high of the day as prices dropped 23 points over the next minute. The market continued to weaken soon dropping into the negative column before support appeared above 24.50 (basis N-23). The market gradually improved throughout the morning but remained well below the opening highs. However, as US traders got to their desks heavier long liquidation appeared taking prices down 60 points over the next couple of hours. Eventually, the aggressive selling dried up allowing prices to recover slightly by the close. The KN dropped 2 points to end at +49 while the NV was 6 points weaker at +28. It was a contrasting opening in London as prices dropped nearly $6 in the first 5 minutes of trading. The market remained under the cosh for the remained of the day with only some light support eventually found at 675.00. The QV slipped $3.80 to +13.40 while the VZ was over $4 down at +11.60. This meant the WP also weakened with the VV WP ending at 132.60 and the VZ at 121.00. The opening saw an exaggerated spike higher which may prove to be the high in the short term as some enforced short covering was seen. Technically over-bought it will have surprised few that prices dropped back. However, despite the correction prices still remain very firm and few are expecting any wholesale sell-off.

The COT, as of the 18th April showed that the funds/specs had increased their net long position by 2,580 to 214,523. This was probably to be expected during a period when the market increased by 40 points. The non-commercials increased their net longs by 2,601 to 157,747 although both gross longs and shorts saw drops as longs took profits and shorts covered. The take away is that the funds continue to seem reluctant to increase their longs suggesting they see the up-side potential limited but are happy to hold with the average purchase price well below the market. Whether this changes if prices dip further remains to be seen. The commercials increase their net shorts by 11,009 to 372,359 although, again, it was a case of long liquidation and short covering by the gross longs and shorts as the trade concentrated on their spot month positions. The Index funds did increase their net long position by 8,429 to 157,836.

This morning the market opened 8 points weaker before dropping further on early selling losing another 17 points before this early selling dried up. Currently, prices are back to unchanged. The KN is up 3 points at +52 while the NV is 1 point firmer at +29. In early London trading, the QV is a tad weaker at +13.20 while the VZ is unchanged at +11.60. This morning the macro is mixed with crude lower grains/soya slightly firmer and the USD Index unchanged. The BRL was unchanged on Friday at 5.05. The market may see some more long liquidation as some tired longs and short term funds liquidate but it would seem unlikely prices will collapse. The fundamental picture remains positive with limited physical availability until the Brazilian CS harvest gets into top gear. Five trading sessions until the K-23 expiry. The OI dropped to 78,294 as of COB Thursday with another 43,396 lots traded on Friday. This suggests another decent drop in the OI and pointing to a small delivery at the moment.