REPORTS

The week ended with a bang in sugar as , having settled above 21 cents for the first time since mid- November last year and also above the 100 day Moving average at 21.04, substantial buying came in seconds before the close. We estimate that over 4,000 lots were bought on March NY in the last 15 seconds of trading and the market traded the high at 21.40 right on the close. Whether this buying was an attempt to “dress” the market up at the endo of the week or whether it was technically related is a moot point. Approaching the close and on a Friday night, many traders withdraw working orders so everyone was caught on the hop. At the same time, resting GTC buy stop orders would also have been elected and there was a dearth of resting selling. 
 
Whatever the reason, it was a strong close and the rally has continued so far today with a new high posted of 21.49 soon after the opening at 21.28 and March NY is still some 25 points above settlement at 21.36. The front March/May spread has also maintained strength. Having traded a range of 3 to 25 pts inverse on Friday, it reached 29 points so far today and is currently at 27 points inverse with May/July at 40 pts. The whites market has not managed to keep pace as both March and May whites premium are narrower at 84.50 and 91$ value respectively which reflects the slightly weaker outlook on the whites ahead of expiry of the March next week.  
 
The front March/May has not recovered like its NY counterpart and is still trading at over 3$ discount, perhaps anticipating deliveries from Central America (including perhaps Mexico). Any change of Indian import policy is likely to be too late to affect March and is likely to impact the forward spreads. We believe the later this decision is left; the more likelihood there is that eventually India will have to import whites to quell the rises in the domestic market price. 
 
The commitment of Traders report published on Friday night caused no surprises with a small decrease in the net Non-Index Fund and speculative position including options of over 1.6 K lots to 189,953 lots long. Overall OI including options had decreased by 3.4K in the week to 31st Jan and we also note that Index Funds increased their net long by almost 2.5 K to 154,594 lots, reflecting new money coming in. The market range in the period was 20.74 to 20.13 in the period. 
 
With a change of India’s import policy expected at some point, the base of the market seems to have been established at 20 cents and below. There have been additional rumours lately of Iranian and Chinese interest and this too is underpinning values. With Brazil in its intercrop period, physical values there have also been improving and there is speculation that there is a ready receiver for the March tape. Whilst there seems to be little concrete to back the current rise other than technical, the market seems to be rather “jumpy”, aware that the picture could change rapidly. Basis March NY resistance is now 21.50, 21.90 and 22.20, while support is at 21.18, 21.04 20.88 and 20.55. We will now see if we have entered a new 21/22 range.