Friday March 20, 2020

World sugar futures ended a brutal week on a positive note, posting higher settlements for only the third time in the past 20 sessions. May settled 32 higher at 10.91 after ranging from 11.19 to 10.82. July settled 29 higher and the back months from 27 to 34 higher. Outright traded volume was 198,043 lots. On spread, May/July traded from three over to nine over and last at eight over. July/October traded from 17 under to three under and last at 13 under. WTI Crude spent the overnight trading in the black but the early gains unraveled through the afternoon. The Brazilian real rebounded back to 4.9925 late this morning and this, coupled with the initial impulse higher in Crude, bolstered sugar’s prospects. After Sugar #11 closed for the week, WTI Crude eased to a new low for the move at $19.46 before rebounding back to $22.43, 11 % down on the day. May #11 lost 79 points on the week.

Option watch: Option volume was 47,374 contracts consisting of 27,803 Calls and 19,571 Puts. Volatility continues so show strength. Paper bought size in May call spreads. Trades of note: 3,850 May 12.50/13.50 Call Spreads vs 11.06 trade 7, 800 May 11.00/12.00 1x2 Call Spreads trade 14, 500 May 14.00 Calls trade 3, 300 May’21/May 12.50 Put Calendar trade 14, 250 May 11.00/10.00 Put Spreads trade 30, 1,500 July 9.50/March 11.00 Fences vs 10.82/11.52 trade 120, 1,474 July 12.00/10.00 Fences trade -7/+8, 1,050 July 10.00/9.00 Put Spreads vs 11.10 trade 56, 875 July 10.50 Puts vs 11.07/.08 trade 46-48, 576 July/October 15.00 Call Calendar trade 5-6, 500 October 11.75/July 9.50 1x2 Fences vs 10.98/10.81 trade 11, 2,000 October 11.25/13.25 Call Spreads vs 9.00 Puts vs 11.22 trade 45, 980 October 12.00 Puts vs 11.16 trade 140, 700 October 15.50 Calls vs 11.22 trade 11, 500 October 11.00 Calls vs 11.04 trade 94, 500 October 16.25 Calls trade 9 and 601 March 15.00 Calls vs 11.64 trade 31. ATM Vol’s: May 11.00 Straddle 91-94 - vol 39.80, +.90 % June 11.00 Straddle 121-125 - vol 35.40, +.45 % July 11.00 Straddle 143-147 - vol 34.10, +.10 % October 11.00 Straddle 179-186 - vol 29.70, unchanged Option open interest: Calls 358,559 +5,781, Puts 303,620 +16,196 - total 662,179 +21,977

The CFTC Commitment of Traders supplemental report showed a net spec long position, exclusive of the index position, of 7,558 lots as of Tuesday March 17th. The market anticipated further long liquidation but perhaps not as much spec short-covering. Given the nature of the volatility in every market, there is a good chance that traders have simply lightened positions. May futures traded from 12.65 to 10.85 during the reporting week, completing what has now been a 30% decline in prices. This week, the large speculators liquidated 53,060 longs (100,000+ in two weeks) and covered 20,889 shorts to be net short 5,519 lots, while the small specs liquidated 6,886 longs and added 4,537 shorts to be net long 13,077 lots. The index funds liquidated 13,095 longs and added 17,752 shorts to be net long 241,541 lots. During the week, the commercials added 18,962 longs and covered 35,944 shorts to be 108,525 lots short.


In the USMCA region: US futures settled five lower in May at 26.80 and from five lower to unchanged across the back months today. Trading was confined mainly to the May/July spread, which has been the best vehicle for traders to move sugar into the nearby position over the past 10 days or so. May traded lightly in outright dealings between 27.00 and 26.80 and traded for 100 lots on spread at 10 under July. We attribute the relatively narrow discount to demand by users striving to refill pipeline inventories following (during?) the pandemic-related surge in retail sales.

The U.S. and Mexico have agreed to restrict all nonessential travel across the shared border in an effort to slow the spread of the coronavirus. “Both our countries know the importance of working together to limit the spread of the virus and to ensure the commerce that supports both our economies keeps flowing,” US Secretary of State Pompeo said after announcing the agreement with Mexico. The new restrictions will take effect on Saturday. Related to the stories we posted here yesterday, Pompeo said that the U.S. and Mexico are in discussions to ensure that workers, including legal agricultural workers, could continue to cross the border for their jobs, noting that the aim was not to interfere with commerce.

Regards,

JSG Commodities This email address is being protected from spambots. You need JavaScript enabled to view it. (203) 853 3000

JSG Indications: Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Raws: USNH: 26.90 26.90 27.10 27.00 27.00 27.00 Mexican peso to USD: 24.5580 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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