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Trading was calm during the early part of the day, and though the move beyond 20.00 has drawn out additional producer pricing there was no apparent desire for the specs to let things fall back with an early dip to 20.12 gathered back up. A morning spent steadily pulling back towards yesterdays highs looked to be setting things up for an afternoon challenge of the 20.40 contract high, however the screen lit up sooner than expected as specs entered the fray during late morning and triggered some buy stops alongside the aggressive market orders to send the price spiking to 20.73. With only specs buying the market up there was a pullback to the old contract highs soon afterwards as the buying eased, and though specs stepped back in to try and hold the market the weight of selling coming in prevented a return to the highs. For a couple of hours things moved along calmly with sufficient underlying support to hold the market above last nights levels, however the support wore thin and so as March’23 fell beneath 20.29 so a greater volume of long liquidation kicked in. Both the flat price and the nearby spreads were into deficit as the market struggled to find buyers, March/May’23 moving all the way back to 1.21 points from a session high at 1.50 points, while the outright plunged to 19.86 placing it 0.87 points beneath the noon highs. The final hour played out relatively quietly ahead of the lows, though efforts to push back above proved unsuccessful leaving the market to end an ultimately disappointing session (for the specs at least) with March’23 at 19.98.  

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There has been a concerted effort from specs/funds to re-establish the markets bullish credentials this week, and while early activity today saw losses there was a quick pick-up which ensured that March’23 soon moved back above $550.00. The price action then started another rise as spec interest increased and by late morning, we saw March’23 work beyond yesterday’s highs and back into new contract high territory. It was not long before this set the wheels in motion for some more aggressive fund buying which sent the price spiking up to $564.50, though the lack of follow up interest mean that prices retreated by a few dollars soon afterwards. The specs were not finished, and the next few hours saw successive efforts to continue the progress fall short of the earlier highs, and then worryingly for the bulls the lack of progress led to long liquidation which led to a reversal of fortunes. With no significant buying from end users / consumers the price slipped rapidly back down through the range, heading back into the red and continuing south to accrue losses in excess of $10, a remarkable turnaround in fortunes. With spreads having given back plenty of ground (March/May23 dropped to $14.50 from a high at $21.80) and the futures sitting on the lows we headed towards a disappointing close, where settlement was made at $545.00 ahead of new session lows at the death. White premiums also pulled back through the range late on to leave March/March’23 back at $104.50, and despite the promise of the last 48 hours the market finds itself back within recent parameters and with much to do by the funds if they are to get the momentum going again.

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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