SO, ARE THE “SPECS” INVESTING IN SUGAR AGAIN? LET’S TAKE A


STEP BACK. In general, 2023 started well for Commodities and there was a lot of risk “deployed” in Commodities, which were on the long side. Sugar was one of them. Throughout the year we saw long liquidation in Grains and Oilseeds. Soft Commodities were defiant, but mostly Cocoa and Sugar as in Coffee and Cotton they were also selling. Sugar was for sure where Specs were “happy” to deploy risk and was on the long side.


Then the Brazilian CS cane crop kept on going and India reduced the amount of Cane juice/molasses that could be used for Ethanol. The selling started end of November and carried on and by the end of December, the market had fallen 8 cts (28%) as “Specs” sold 8 mln m/t.


Since January 2024 we haven’t seen major “Spec” activity and the market fluctuated from 20 to 24.50. We are now at 22 cts (12 March 2024).


THE GENERAL INVESTMENT IN AGRI COMMODITIES IS LARGE, BUT THE NETT


WE RUN THE RISK THAT IMPORTERS MAY TAKE THE MARKET FOR GRANTED,


LONG IS LOW. HOW COME? Grains and Oilseeds attracted “Specs” on the short side and the size of those positions are very large. We are yet to see the USA planting crops development and harvest. Is it worth carrying on being short? Well, Specs think so!


Specs are also very interested in Cotton (very long) Coffee (long) and Cocoa (still long), but Sugar they are not keen. When we say they are not keen we mean the Gross Short and Gross Longs remain relatively low.


Sugar prices (Futures) are lower now, the cost to carry less (not full carry yet) and the expectations for lower interest exist, but we are not there yet.


We would say that for 2024, with a trade flow seeking as much as 10 to 11 mln m/t from Brazil, in addition to what Brazil exported last year, won’t be easy. What Brazil tends to carry and export in January to April (produced as of December) will be required earlier on and logistics will be tested like never before.


We run the risk that Importers may take the market for granted, Traders hold tight for their supplies and some may decide that taking delivery is the safest option.


The cash market is likely to remain firm, enquiries stronger than offers and spreads may give the signals that the market is “desirable” and in short supply. Time will tell as we also need to watch the weather.


El Nino was the weather risk for 2023, it was not bad, but did cause some problems. Brazil had too much rain during the time to plant Soybeans in the South and not enough in the Centre-west. Cane was OK. We had reduced rainfall in India and Thailand as well as Central America which affected cane development.


14 | ADMISI - The Ghost In The Machine | Q1 Edition 2024


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