Good morning,
The markets dropped back on Friday after failing to break above the recent high which triggered a bout of long liquidation into thin volume. The market had opened slightly higher but was immediately on the back foot falling 20 points during the morning in quiet trading. Prices took a swift dive as a sell-stops were triggered just above 20 cents which saw prices lose another 20 points in the space of less than 2 minutes. This appeared to take the wind out of the market with prices remaining within an 18 point range through to the close to settle as most of the gains over the previous two sessions wiped out. The VH remained weak slipping 3 points to end at -83 while the HK finished 1 point firmer at +57. The OI in V-21 dropped to 65,700 lots with another 32,400 lots traded on Friday continuing to suggest a minimal delivery. In London it was quiet again with the ZH slipping back to levels seen earlier in the wee at -4.50 while the HK was also a tad weaker at +4.40. This meant the HH WP was unchanged at 69.40 while the KK WP was a tad firmer at 77.60. it was a disappointing performance for the bulls as the market gained for three sessions only to drop back into the range after failing to find any fresh buying to push through the recent highs.
The COT as of the 21st September showed that the funds/specs cut their net long position by 5,034 to 204,426 which was probably in line with expectation with prices rallying at the beginning of the period only to fall back with just a 9 point gain. The non-commercials appeared to be generally absent as they cut their net long position by 2,484 to 163,161 with just the short term funds active. There was rather more activity within the commercials as the V-21 expiry came into focus and the V-21 option expired. They increased their net short position by 9,642 but both trade longs and shorts cut positions with gross longs down by 54,667 lots and the gross shorts down by 45,025 lots. The Index funds also were active due, presumably, to option expiry. They increased their net longs by 14,677 to 195,000.
Unica will release their latest harvest data for the first half of September today at 15:00 (London time). The same period last year saw the crush hit 44.39 million tonnes with sugar production at 3.18 million tonnes. This season a drop in production is expected – some see around 15% due to the dry weather and frost damage. Traders and analysts will be looking for evidence of a sharp slow down in the crush with analysts expecting the harvest to finish early this season with most mills finishing crushing by the middle of November.
Brazil’s President Bolsonaro suggested last week that a decrease in the amount of ethanol in gasoline as one way to lower the price of fuel and help control inflation. However, he did concede it is not a decision for a President and it is unlikely any cut will be seen for the time being.
This morning the market opened 7 points firmer before slipping back to just above unchanged. Currently prices are around 7-8 points firmer. The VH is a couple of points firmer at -81 while the HK is 1 point weaker at +56. In early London trading the ZH is slightly firmer valued at around -3.90 while the HK is slightly weaker valued at about +4.10. The macro is a generally positive picture with crude back at the highs while grains/soya mainly higher with the USD Index slightly weaker at 93.28. The BRL weakened slightly on Friday to end at 5.34. Traders and analysts await the Unica data with interest. Whether it will have any significant influence on prices remains to be seen but, if nothing else, is likely to add more support into the market. The V-21 expiries on Thursday. The front spread remains weak but receivers may make a move before long as the volume starts to thin. In the short term the market looks set to remain within the range of the past 10 sessions but would appear more likely to break higher than lower.
Contact the ADMISI Sugar Desk team:
Phone: +44(0) 20 7716 8598
Email: admisi.sugar@admisi.com
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© 2021 ADM Investor Services International Limited.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
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