Global Sugar Trade reached 61,6 mln m/t in 2020 up from 52,1 mln m/t in 2019. Total Global Raw Sugars trade was around 39 mln m/t an increase of 8,4 mln m/t vs. previous year and Brazil share was 26,7 mln m/t.
Total Global White Sugars Trade was around 22 mln m/t, marginally better than 21,3 mln m/t in 2019 and 21,7 mln m/t average for the past 8 years. White sugar imports fluctuated during the year and from origins but overall, the yearly volume hasn’t changed much. Brazil exported 3,9 mln m/t vs. 1,9 mln m/t the year before.
It’s likely the World sugar flow may drop from 61,6 mln m/t given that some countries re-built some stocks. We currently estimate 57/58 mln m/t so a possible drop of 3,6/4,6 mln m/t overall.
We estimate that some producing nations like USA, Mexico and Central America may have similar crops, at the best, with some downside depending on the weather. Acreage hasn’t increased.
Europe may struggle to improve from the past crop as acreage is expected to be down and the weather would have to be very good for agri yields and sugar content to bring the extra production. The CIS is expected to improve vs. last year, weather permitting as acreage in Russia is expected to rise by 15%.
Asian crops from India to Thailand will depend on weather and acreage to show some improvements vs. last year. It’s too early to be sure on India given the covid situation which may affect some re-planting/ acreage although we don’t expect any major impact. The cane yields will depend on the monsoon but so far, all signs are of plenty rain on the way. Thailand is expected to increase acreage and the weather so far is OK. We could see Thailand bouncing back to 80/100 mln m/t of cane vs. 66,8 mln m/t last crop. Australia is expected to have a similar crop and rainfall is OK.
INVESTMENT FLOW The latest CFTC report (as of the 1st of June 2021) showed inflow of Funds into Agri Commodities again. Overall, the net change by Funds/Specs was an increase of 89,272 lots to their net longs. Index Funds reduced their net longs by 13,977 lots for the 3rd week in a row. On a net basis, the Commodity bubble is still large at 2,495k lots about 2% higher than the peak in 2008 and 15% larger than the peak in 2016.
Having said that, the “bubble” has been 12% larger and deflated by 414k lots since the beginning of the year. The investment flow into Commodities picked up speed from Aug 2020, when funds covered shorts and started going long. The highest net long, for all Agri Commodities overall, was around mid Feb 2021.
The main pillars of the Commodity inflow of investments remains Corn and current net positions represent 55% of the world trade. In Sugar they are over 37%, followed by Cotton and Coffee at 30% and Soybeans at 20% of the world trade.
The average net position of all Investors vs. the Open Interest is around 28% (Sugar 37%) vs. 12% this time last year. In Sugar nr 11, Fund’s account for 15%, Specs 5% and Index Funds 17% of the Open Interest.
So, it seems, until we see the US, Brazil, Argentina, CIS etc… Agri crops safe on the ground, growing and eventually being harvested, the upside risk for prices remains. Sugar is no exception and all eyes are on Brazil’s weather, harvest, sugar mix, the Real/US$, physical off take etc……
SUGAR IN BRAZIL VS. THE
ENERGY SECTOR Gasoline prices in Brazil remain strong but overall demandfor fuels remains weaker vs. normal levels although better than last year. Gasoline prices in early June are on average 30% higher than in October 20 and Ethanol prices are stronger i.e., 43% higher in June vs. October 20.
The weight of the new crop is not yet “damaging” Ethanol domestic prices which are trading at 76% higher YoY in Reais and 70% higher in US$. Hydrous Ethanol prices are on average at 86% of the value of Gasoline, so no wonder consumers are really upset with higher fuel prices as there is nothing cheap!
Hydrous Ethanol is trading at the equivalent of UScts/ lb 18,32 tell quell or Ucts/lb 17,58 basis 96 pol. So officially Hydrous reached Sugar prices (Sugar nr 11 closed at 17,76 on the 8th of June). Looking forward, the BMF (local commodity Exchange) is trading at the equivalent of low to mid 17’s which can be used as a guidance.
PRODUCERS AND CONSUMERS
PRICING FOR 2021 We estimate producers sold 16,5 mln m/t at an average of UScts/lb 15,75 since the beginning of Oct 2020. For the same period, we estimate consumers bought 17,4 mln m/t at an average of UScts/lb 15,92. Overall it seems producers are a little bit behind consumers but they started the year well priced for 2021 and consumers were not.
It’s very likely most producer selling is for positions from the end of 2021 into 2022 and consumers are still pricing nearby positions. We estimate that producers have less than 15% to price for 2021, and consumers have at least 25% to price for 2021.
Alberto Peixoto E:
albertopeixoto@apcommodities.london T: +44(0) 7570 714 981
THE WEIGHT OF THE NEW CROP IS NOT YET “DAMAGING” ETHANOL DOMESTIC PRICES WHICH ARE TRADING AT 76% HIGHER YOY IN REAIS AND 70% HIGHER IN US$.
19 | ADMISI - The Ghost In The Machine | Q2 Edition 2021
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