Sugar Market Report for 18 October

Good morning,

The market corrected Friday after the drop on Thursday to register and inside day as the market remains range-bound. The market had opened 1 point firmer before climbing as short covering and fresh buying emerged. By late morning the market had gained 35 points with resistance noted as prices approached the 20 cent level. Prices held the gains over the next couple of hours hitting the day’s highs early afternoon but never managed to reach 20 cents. Prices eventually fell away but maintained much of the earlier gains. A late bout of selling saw prices slip 10 points during the settlement period with prices ending mid-range for the day and resolutely stuck within the range seen since the beginning of September. The HK ended unchanged at +34 while the KN lost another 5 points to end at +32. In was a better picture in London with the ZH gaining nearly $2 to finish at +9.10 while the HK was also firmer at +4.30. This meant the HH WP improved $1 to 74.40 while the Kk WP was slightly weaker at 77.60. The market tested both ends of the range last week hitting the highs on Monday before dropping back over the week to hit their lowest level since 28^th September on Thursday before a slight recovery was seen Friday. There is precious fresh fundamental news around at the moment. The Brazilian CS harvest is on the home straight while we are only a few weeks away from the start of the next Indian cane crush.

The COT report confirmed how quiet the market has been recently and that the funds are generally absent from the market. The funds/specs increased their net long position by just 367 to 209,427 as of the 12^th October. The non-commercials actually saw a cut in their long position of 3,183 to 159,663 during a period that the market increased from 19.85 to 20.61 before slipping back to just above 20.00 cents. Since then prices have dropped further so one would suspect the non-commercials net long position is slightly lower. The commercials cut their net short position by just 508 to 397,426 as the trade were on both sides of the market albeit in thin volume. The Index funds cut their net long position by 874 to 187,999 on more fresh selling.

This morning the market opened 3 points weaker before slipping another 6 points in thin volume. The HK is 1 point weaker at +33 while the KN is unchanged at +32. Currently, prices are 10-11 points lower. In early London trading the ZH remains firm and unchanged at +9.10 while the HK is slightly weaker at +3.80. The macro is a mixed picture this morning with crude higher and grains/soya around unchanged and the USD Index firmer recovering from the large drop on Wednesday last week. It does seem the market is content to remain within the 115 point range seen since early September. All the bearish news regarding the Brazilian CS crop is in the market as is the fact India is likely to produce another 30 million tonne plus of sugar and their stocks plus surplus over domestic consumption will be enough to plug any supply gaps this season. If the funds decide to liquidate more longs then prices will drop and could slip out of the range on the downside. End-user pricing will be waiting but probably on a scale down basis.