The market picked back up where it had left off with morning support being found ahead of 19.50, leading the dull sideways trading pattern of yesterday afternoon to continue for several more hours. Volumes were lows and only showed a modicum of increase as light buying pushed back up to 19.62 with the arrival of US specs, though this served only to precede a sharper collapse. March’23 pierced beneath 19.50 and stopped out a few spec longs in reach to 19.4, and then subsequently to 19.35, showing that while the bulk of the spec long remains in place there are increasing concerns amongst some to reduce exposure levels as the price moves down to the area where we are reaching average entry levels. Spread activity was moderate as March/May’23 only narrowed a few points to 1.15 points, showing that near term availability issues remain, though whether that can be sufficient to pull prices back up in the weeks preceding the fund roll remains to be seen. Late afternoon saw March’23 continuing to the bottom end of the range and while there remained steady scale buying it did not deter one final closing burst of long liquidation which ensured a marginal new session low and left settlement price at 19.34. The downside now sees the 50% retracement of the Sept/Dec move at 19.19 and November low at 19.05 as significant markers, with more aggressive spec liquidation likely should these be breached.  

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The day began slowly with some minor losses as March’23 slipped to $542.00, with a sleepy morning then ensuing with prices continuing along sideways in a narrow band. The market has found itself increasingly struggling for direction of late with the retreat from contract highs only seeing moderate reduction of the fund long, meaning that while the longs would like the market back up, they do no not have the capacity (or willingness) to push aggressively at the present time. Similarly, it feels that the long-term nature of their long holding provides reason to not need to liquidate unless the picture significantly worsens, leaving the market to do its own thing until some significant fresh news emerges. The afternoon did see some increased movement and once again it was to the downside with some light spec liquidation against No.11 rippling across to send March’23 sliding. The bulk of this movement impacted the March’23 with spreads particularly weak (March/May’23 dropped to $13.90) and March/March’23 WP to $108.50, though the situation was rather more solid across the rest of the board with May/May’23 WP holding above $119.00. Things did not improve for March’23 during the closing stages with new recent lows recorded going out, settling only just above the lows at $534.70 and leaving the market delicately placed with the congestion either side of $530.00 providing an important area to hold if we are not to signal a more decisive move lower.  

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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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