Having performed so strongly over the course of this week there was no way that the buyers were about to let go of the market easily, and so the pattern of buying which pushed March’23 up into the mid 20.90’s was to be expected. The pace of this week’s rally has taken many by surprise with new longs entering the market from both the fund and trade sectors while producer selling has proved to be increasingly sparse, possibly linked to returns once currency rates are considered into the price, and so some profit taking in the vicinity of 21c was to be expected. This caused the rally to stall, and some concern was flagged during the early afternoon as long liquidation sent March’23 back down to 20.55 with buyers now few and far between. Defensive buying then emerged with longs showing their determination to maximise the current potential and this reinvigorated proceedings for the final couple of hours. The aggression being shown at the front of the board brought the December highs back into view, and while March’23 remained a little shy despite reaching 21.03 on the post close there was a move to 19.67 for May’23 which is a new contract high. Settlement prices were just shy of these marks at 20.96 (March’23) and 19.61 (May’23) as the week ended on a firm note. Tonight’s COT report is unlikely to show too much change given the flat nature of the reporting period, though it will provide a guide for those keen to guess as to what has been added by funds over the past three sessions. The sharp nature of the rally has taken the market towards overbought territory with the next moves keenly anticipated to see just how much further the longs may be prepared to push given the lack of any fundamental reason for this movement. 

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There was buying appearing into the market during the early part of today’s session which catapulted the market higher to record new monthly highs as March’23 reached $563.70. A period of consolidation followed around these highs however with the No.11 stalling and the whites still very much following the lead of raws there was a calming which led prices to ease a little either side of noon. There was a pullback for the front of the board soon afterwards which resulted in new daily lows being recorded, but though this appeared rather bleak the influence from No.11 then gathered the market once more. The market pulled back up convincingly over the rest of the afternoon though it is increasingly the May’23 contract which is leading the way forward, reaching new daily highs at $554.50 while March’23 “merely” matched the morning highs and the spread narrowed to $8.70. Despite the weakening of the spread the March/March’23 was still maintaining near to $100.00 while May/May’23 proves to be robust at $121.00. Closing prices were positive with March’23 at $562.40 and May’23 at $553.50 providing a very strong picture to take into the weekend as we wait to see whether the buyers will continue to push the market next week.

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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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