• The technical surge higher continued today, however it was only the spot month which went stratospheric as March/May blew out to a widest 0.78 points despite a huge volume of fund rolling with daily volume topping 120,000 lots. Initially the push was rather controlled as early gains beyond the Nov 2017 high of 15.49 were tempered, however the pace increased during the early afternoon with both outright and spread buying helping March’20 all the way to 15.90, almost 100 points above the weeks starting level. Given the already heavily overbought technical indicators the arrival of profit taking at the higher levels was to be expected, though even on the correction the March spreads remained strong as instead all positions bar the prompt headed into negative territory. With the middles now trading around/above ethanol parity it can be no surprise that there remains decent selling/resistance, though history tells us that we can detach from the fundamentals for periods should the market so desire. March’20 pushed back up to re-challenge the highs during the final hour, however the continuing reluctance of the rest of the board to follow meant that we only matched the earlier high before sliding back a touch against end of day book squaring.
  • With just two days now remaining until the March’20 whites expiry it seems we are set for a huge delivery. Market chatter is of a potential delivery of 750,000mt which given that last night’s OI stood at 23,974 lots seems entirely feasible. It will be interesting to see that impact of today’s sizable 15,479 lot March’20 volume on the OI tomorrow.
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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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