PRODUCTION ON COURSE Elsewhere there are no huge production concerns. Thailand is on course to increase total production by around 15% over last season reaching just shy of 12 million tonnes. One unknown is beet production in the EU. With the total beet area planted still to be determined several factors have to be taken into consideration. The war in Ukraine has seen global grain prices improve and will be one consideration taken by farmers when planning their planting regime. Secondly, the use of the controversial pesticide, neonicotinoid, has been, effectively banned with the French Government recently bowing to the EU on not allowing their use in the coming season. The French government have said they will compensate farmers but some may see it as a risk not worth taking. The global weather forecast suggests neutral conditions over the coming months with neither El Nino or La Nina being present. However, global warming is making the weather very unpredictable – recent unseasonal heavy rains across the Brazilian state of Sao Paulo which has caused much damage and loss of life.
DEMAND CONTINUES TO IMPROVE Demand has continued to improve after taking a big hit due to the global lockdown caused by the pandemic. Many end-users destocked as demand became unpredictable and freight rates surged. Needless to say, eventually buyers had to restock causing demand to jump with white sugar prices the first to leap along with the White Premium. Raw sugar prices eventually followed as Brazilian production remained limited while the cane continued to recover from the drought and the vast majority of the six million tonnes of Indian allowable exports white sugar. According to most analysts consumption growth remains below pre-pandemic growth levels but is improving steadily. So while a global surplus in production is expected for the current season supply will not become more
abundant until the next Brazilian CS harvest starts in early April. This view is borne out by the market structure of raws with a massive spot month premium and the backwardation of the market.
SPOT MONTH STRENGTH Undoubtedly, the strength of the spot month has pulled the rest of board higher and many believe the flat price will drop back in time. A recent Reuters poll suggested that raw sugar prices will fall to 18.50 by the end of the year with a 3.25 million tonne global surplus predicted for the current 2022/23 season. Disappointingly, another surplus is predicted for 2023/24 but that is pure conjecture with the likelihood of many unknowns scuppering this view.
Fund activity will continue to dominate proceedings. At the time of writing their long position is difficult to determine as data issues with a major software provider has delayed the publication of the ‘Commitment of Traders’ report by several weeks. Nevertheless, they are, undoubtedly, hold a long position which helped propel prices from below 18 cents in early November, when they were effectively flat, to nearly 22 cents by February. Technical considerations and a weakening US Dollar has kept market sentiment positive and macro considerations will continue to impact.
There is still much uncertainty over final Indian production, future Brazilian production and a host of other considerations. Therefore, while the multi-year highs reached in February may not prevail it would seem wise that traders remember the old market adage to ‘expect the unexpected’.
Howard Jenkins E:
howard.jenkins@
admisi.com T: +44(0) 20 7716 8598
WHAT IS PROBABLY NOT IN DOUBT IS WHO WILL WIN THE
PRODUCTION CROWN IN 2023/24.
12 | ADMISI - The Ghost In The Machine | Q1 Edition 2023
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
