Sugar #11 May’22
The geopolitical situation continues to drive commodity markets and the pre-opening was already showing plenty of green in response to a macro which had seen brent crude already trade above $137 before easing back to sit at a “mere” $130 per barrel. No.11 duly gapped higher with several thousand lots trading over the first few minutes as May’22 reached 19.80 initially and then continued to reach 19.89 before cooling a touch as things settled down. The decline was only moderate however and with specs continuing to pursue the long side so the market restabilised to be pushing back up toward the highs heading into the afternoon. Though funds have increased longs over recent days the COT report last week showed a net long of 56,992 lots, a modest number which will likely have increased to somewhere nearer 100,000 lots at time of writing, and this suggests most action is from the smaller entities with hedge funds still reluctant to commit to sugar in any significant way with the macro currently detached from our own fundamental outlook. This will be assisting producers who continued to price on a scale up basis and with no fresh influx of buying as the US-day commenced so a sell off led by long liquidation sent prices quickly back down towards unchanged levels. This served to fill the overnight gap and things then calmed down significantly, in part due to a cooling macro which while still positive saw most products away from their morning highs. More worrying to the longs will have been the reaction of the spreads which narrowed significantly on the pullback, May/Jul’22 falling back from 0.35 points to be trading down at 0.15 points, a sign that the trade is far less invested in this move than the specs. With prices meandering at the lower end of the range through the afternoon this situation showed little change and approaching the close this led May’22 to be trading in debit despite modest gains remaining in place across the rest of the board. Closing activity saw May/Jul’22 all the way into 0.11 points and left May’22 settling at 19.27, a modest loss but one that suggests we could see some further unwinding of the technicals in the coming days whether through correction of consolidation.
