Following two weeks in which the market has edged back down through the range towards the broad 17.50 support area it has been hard to find much buying, however some interest appeared this morning enabling prices to jump up into the 17.70’s from the off. The initial movements seemed to be driven by trade/consumer hedge lifting with the lower levels presenting a good opportunity to buy/price, and values remained steady through the morning despite volumes dropping away. Friday’s COT report showed that the net speculative long had reduced to 55,552 lots as at last Tuesday, with more likely to have been sold over the rest of last week to further reduce this holding, however the start of the US-day saw this trend reverse with some spec buying (buybacks possibly) taking March’23 back up into the 17.90’s. With other commodities rather mixed Sugar was holding up well and remained positive through the afternoon as each pullback was well defended by specs, eventually leading prices to an 18.00 high. Nearby spreads were also buoyant with the buying heavily focussed on the front month, March/May’23 building on its continued positivity and extending to a daily high at 1.10 points late in the afternoon. March’23 settled at 17.97 to be well positioned for further recovery, as the market remains resolute in holding the same range that has prevailed over recent months for a while longer. 

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The new week started with a bang, last week’s struggles quickly forgotten as the market jumped higher and continued to make progress through the early period. Admittedly the rest of the board had no interest in following the lead being set by Dec’22 with the front month being squeezed up to $529.30 before pausing for the rest of the morning. This movement was also in contrast to the No.11 markets more modest gains and widened the spot white premium significantly, something which further strengthened as a spec push in the early afternoon sent Dec’22 to a high at $536.20 and the Dec’22/Mar’23 premium towards $143.00. This was so far outside the parameters of the rest of the board and the mixed macro picture it proved to be impossible to sustain with the afternoon seeing a corrective move back to the $530 area based on day trader liquidation, and ironically as the wider sugar picture improved there was a further weakening to the $526 area later in the afternoon. Spreads too were well away from their highs with Dec’22/March’23 ending the day at $36.10 (from a mighty $47.40 high) with the day petering out relatively calmly. Dec’22 settlement at $527.20 stems the recent decline and with just 2 weeks now until it heads off the board eyes will be focussed on the potential for a further squeeze in keeping with previous expirations this year.  

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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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