• The current situation for speculation is probably the least positive that it’s been since COVID hit.
• In this week’s Ask the Analyst, we discuss what it might take for the specs to return to the market.
• If you’d like us to answer one of your questions in an upcoming edition, please email will@czapp.com.

What Could Bring the Specs Back into the Market?

The current situation for speculation is probably the least positive that it’s been since COVID hit.

A strengthening USD and increasing interest rates mean speculators are more likely to be risk-off and reduce their exposure to sugar and other commodities.

However, their involvement in the sugar market has fallen significantly since November and we think that, despite the less attractive macroeconomic conditions, there should be space for them to buy or sell if the sentiment takes them.

Now the speculators have exited the market, they’ll need a decent fundamental story to bring them back.

At present, the most likely source of a story that could influence spec behaviour is if the weather underperforms in Brazil ahead of the 2022/23 crop.

Right now, rainfall is slightly below average but there needs to be good rainfall in February to facilitate a healthy crop. If this doesn’t come, we could see the return of aggressive spec buying.

Other Insights That May Be of Interest…

Market View: Sugar Loses Direction