So attention is now turning to production prospects for the 2019/20  against demand given the continuing very low sugar price? There are, obviously, reasons to be optimistic. Brazil is likely to continue to use over 65% of their cane for ethanol. EU processors have agreed new beet prices with their farmers at a level that should see the planted area cut substantially. Production in India and Thailand is expected to fall due to more cane being diverted to ethanol and cane being substituted for other crops paying higher margins. It is also likely that production elsewhere will be cut due to the low prices. It is probably fair to say that prices have been below the cost of production for virtually every producer for the past 18 months and this is likely to translate into lower production in many exporting countries.


 in stocks. It is entirely possible that by the end of the Asian harvest the world will have 15 million tonnes of excess stocks, much of it in India. There are various arguments about the feasibility of India being able to export any more than a small percentage of these stocks over the next 9 months. Nevertheless, the sugar will still exist and will, undoubtable, act as a ceiling to price rises until the market gets some idea on total 2019/20 production.


It would be remiss if the ‘elephant in the room’ is not addressed. This  and the implementation of ‘Sugar Taxes’. An entire article could be  is stalling in developed nations and not rising as fast elsewhere. It is something the sugar industry, as a whole, need to address.


Some solace can be taken from the fact that the recently introduced tax  expected, suggesting people are prepared to pay more than give up sugar!


This time last year the whole sugar industry was depressed only to become more so as the year progressed. Are there now reasons to believe things will get better this year? Cautiously, it is possibly a yes. Global production is very likely to drop in 2019/20. The extent of the fall   be expected. Stocks will remain an issue. The key to seeing a rise in price is the funds. In March it will be two years since they had a substantial long position. They might start to build another if the fundamentals, technical, and macro all align. This would undoubtedly increase volatility which in turn should increase trading ranges, volume and interest all that have been in such short supply over the past 18 months.


So to predict that the sun may shine once again on the sugar market might be slightly premature. However, it is probable safe to assume the rain may stop soon.


Howard Jenkins E: howard.jenkins@admisi.com T: +44(0) 20 7716 8598


11 | ADMISI - The Ghost In The Machine | January/February 2019


EU PROCESSORS HAVE AGREED NEW BEET PRICES WITH THEIR FARMERS AT A LEVEL THAT SHOULD SEE THE PLANTED AREA CUT SUBSTANTIALLY.


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