Sugar #11 Mar ’22

A tough couple of days have left the market vulnerable to further losses and the day began on the back foot once again with initial selling seeing Oct’21 slip to 19.05. Consolidation then followed ahead of this early low but with buying restricted to scale down pricing there was no hint that there would be any recovery. With last nights delayed COT report showing the net speculative long holding having increased to 206,824 lots the smaller traders and specs are on the back foot and as they continue to liquidate some of these longs (alongside others pursuing new shorts) so the market pushed down beneath 19c ahead of the US morning. The move was backed by the macro with the recent Omicron strain of covid and comments from Moderna regarding the potential need for new vaccines encouraging some de-risking across the spectrum, and by mid-afternoon we had slipped to be testing the 18.82 low mark from 19th October. With commodities and equities all in the red there was a further blow as Federal Reserve Chair Jerome Powell’s hawkish tone brought more selling across the board, and though there were not the sell stops that breaking 18.82 may have been expected to bring the price ploughed down through the scales into the 18.60’s. The losses impacted on spreads with nearby positions taking the brunt of the hit, though March/May’22 still shows resilience with support in the low 0.30’s preventing any significant decline. With no desire from specs to turn and buy the market at the present time we continued on to record fresh lows around the close, reaching 18.55 with settlement established at 18.60. While this moves us into near term oversold territory it leaves the charts looking negative, and unless the macro picture can find reason to rebuild then then it is hard to see any significant recovery at the present time.     

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Sugar #5 Mar ’22 

A lower opening soon found some buying enabling us to fill the small overnight gap, however with that achieved the trend resumed and the morning pattern of sideways to lower established with prices tracking against the wider macro. The global concerns over the Omicron Covid variant are encouraging a risk off policy across the sector and with the lower trend gathering pace as we moved into the afternoon the only buying was being seen from end user/consumer scales. This sector has proved keen to take advantage of the decline with next years balance sheet still pointing towards generally higher levels at the present time, and though we declined beneath last months $491.50 low to be trading at the lowest levels since August, the scale buying ensured the move was orderly, with any spec selling feeding in with no significant sell stops seen. The front of the board had worked down to the $488 area with a couple of hours remaining, but though the losses reached to $10 here the board today declined in a more usual way with increasingly smaller losses as we worked forward, May’23 for example only around $1.50 lower during the afternoon. The later afternoon saw more new lows recorded with light support in the $487.50/$487 area disregarded, ending the day and month at $485.60 to paint a rather bleak technical picture.  

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Jon Whybrow

Jon joined CZ in 1991, working in the Treasury department before moving to join the derivatives team in 1994. Over 30 years Jon has built up significant experience across derivatives markets and products, particularly sugar, and is now Head of Flow derivatives providing market execution services for CZ’s global client base. He is responsible for the market commentaries which are published each day on CZ app.

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