Friday October 15, 2021

World sugar futures finished the week with a modest rally. March settled 21 higher at 19.80, May 21 higher and the back months from 26 higher to unchanged. On spread, March/May did not show much enthusiasm, trading out to 40 over and the back in to finish the day at 34 over. May/July winded to 38 over before narrowing back to finish the day at 34 over. Technically, March has spent the past five weeks in a 19.31 to 20.61 range and, after testing both ends of the channel this week, came to rest in the lower half of the range. March has bounced across the full breadth of the range on four distinct occasions, showing little inclination to break out in either direction. Since September 7th , March #11 has lost 35 points. In the same time frame, WTI Crude has rallied from $68.35 to a high of $82.45 at today’s high, an increase of 20.6 %. The Brazilian real, on the other hand, has eased from 5.1699 to the dollar to 5.4600 this afternoon, down 5.6 % against the dollar.

Option watch: Option volume was 31,069 contracts consisting of 22,616 Calls and 8,453 Puts. Sugar vol’s continue to drift lower having a hard time maintaining any gains. Paper was active early with more rolling in the January 21.00 Calls, we have seen approximately 8,500 contracts rolled within the last few days which accounts for 50% of the open interest. Paper was also liquidating March 23.00/25.00 Call spreads which they bought in August. Paper was also seen selling October 17.25 Puts. Trades of note: 500 December 21.00/21.50 Call spreads trade 9, 500 March 23.00/ December 21.50 Diagonal Call spreads trade 23, 400 December 20.50/20.00 Strangle vs 19.91 trade 98, 1,350 May 19.50/ 21.00 Call spreads vs January 21.00 Calls vs 19.45/19.82 trade 4-5, 200 January 21.00/ March 21.00 2x1 Calendar Call spreads vs 19.75 trade 4, 4,000 March 23.00/25.00 Call spreads vs 19.85 trade 21-22, 500 July/March 21.00 Call Calendars trade 13, 1,400 October 17.25 Puts trade 85-92.

ATM Vol’s: December 19.75 Straddle 109-113 - vol 23.70, -.85% January 19.75 Straddle 160-164 - vol 24.92, -.75 % March 19.75 Straddle 248-253 - vol 27.35, -.50 % May 19.50 Straddle 288-293 - vol 26.30, -.40 % July 19.25 Straddle 315-327 - vol 25.90, -.35 % Option Open Interest: Calls 351,446 +4,431, Puts 190,667 +2,781 - total 542,113 +7,212

The International Research Institute for Climate and Society has forecast a 70% likelihood that La Nina conditions will be in place from October and last until early 2022. For Brazilian cane areas, this would translate into deficient rainfall in October-November, with rainfall expected to pick up again in December. Rabobank confirmed the forecast, saying that conditions would be drier than usual during the crop development period. Recent rains have been helpful but insufficient, the head of the National Electric System Operator (ONS) said, adding that he was concerned about ongoing dry conditions and low hydroelectric reservoirs in 2022.

Today’s CFTC Commitment of Traders supplemental report showed a net spec long position, excluding the index length, of 205,877 lots as of Tuesday’s close - a bit less than our expectations given some of the volatility during the week. The large specs were net long 159,663 lots after liquidating 4,017 longs and covering 834 shorts. The small specs were net long 46,214 after adding 7,938 longs and adding 4,388 shorts. The net index fund long now has a position of 187,999 lots as they added 944 longs and added 1.818 shorts. The commercials added 1,271 longs and also added 2,810 shorts on the week to bring their position to 294,674 lots short, or 14.97 million tonnes. Once again, this report will draw some snoozes, as the #11 sugar market is range-bound with little to no new outside interest. The Spec position has been within 5,000 lots of 210,000 lots for the last month of trading. We mentioned the considerable decrease in the open interest in the market over the last six weeks. However, this past week did not feature much of a change even as prices rallied to 20.61 only to fall by more than a penny to close the week. We remain optimistic that prices will retest and make new highs for the year and the encouragement may come from the Crude Oil market, which again traded to new highs this week.

In the USMCA region: US futures saw some book squaring to close out a quiet week – 110 lots of futures traded from January through July. January settled five lower at 36.51, the other FY’22 positions settled from 31 to 75 higher and the FY’23 month from 34 to six higher. The domestic cane harvest is underway in Louisiana and will start up in a few weeks in Florida. Weather issues have pushed back start dates in both states, but the weather in Louisiana appears to be cooperating for the moment.


JSG Commodities This email address is being protected from spambots. You need JavaScript enabled to view it. (203) 853 3000 JSG Indications: Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Raws: 38.25 36.75 36.50 36.00 34.75 32.25 Mexican peso: 20.3269 Raws: “Fair value” #16 futures pre-close, or JSG estimate.

This report has been compiled for general informational purposes only. While efforts have been made to ensure accuracy, Jenkins Sugar Group, Inc. assumes no responsibility for errors and omissions

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