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It has been over two months since I decamped to my little study at home. My routine has changed immeasurably. I miss the office banter, the ability to discuss an issue immediately by walking to a colleague’s desk. I do not miss the commuting especially when my train home is late for the fourth consecutive day in a row!
To do listt
• Complete Sugar Report • Market Report - June • The Ghost In The Machine • Send Email to team • Monthly End - sheet
Back in early March the Coronavirus scourge was making its way slowly but surely across the world. From East to West countries were going into lock-down in attempt to halt its deadly advance. China firstly then the rest of Asia followed swiftly by Europe then North and South America. Financial markets were tumbling on the back of great uncertainty and the fears that huge economic woes would be inflicted on countries by the closing and suspension of businesses. Most commodity prices headed south with sugar being no exception. Sugar prices had dropped from nearly 15 cents to just above 12 cents in the space of three weeks as the industry took a distinct ‘risk-off’ attitude. The funds soon started to square up their long position (118k lots at the end of February) and the trade had started to talk of global consumption being hit.
Over the past 12 weeks the market continues to be battered by macro winds. Crude prices dropped to their lowest level ever when the May WTI contract dropped to a negative value as sellers essentially paid the buyers to take their product. Sugar prices dropped to their lowest level for over a decade only just avoiding dropping below 9 cents as the May 2020 contract approached expiry. Concerns about a drop in consumption was coupled with an even greater concern that global production would spike led by Brazil.
The double whammy of collapsing ethanol prices and the Brazilian currency meant that sugar production from cane has suddenly become more attractive. Brazilian CS sugar production had collapsed from 36 million tonnes to just 26.5 million tonnes for each of the past two seasons as low sugar prices and high ethanol prices saw millers switch to using over 65% of their cane for ethanol production. Now, mills, that can, are using nearly 50% of their
12 | ADMISI - The Ghost In The Machine | Q2 Edition
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