The market had two attempts to recover this year as many participants gathered in Dubai in February and NY in May. Both times the market recovered somewhat and then dropped again, making new lows.


As we enter the last month of the 2nd Quarter and 1st Semester, Sugar prices are trading at two-year lows around high 18cts. So, what has happened in the past 6 months to cause such drop?


Well, as we know Funds/Specs (excluding Index Funds) were long 187k lots by mid Oct 23 (9,5 mln m/t) and by the 4th of June 24 they were short 82k lots (4,2 mln m/t), so they sold 269k lots (13,7 mln m/t) the equivalent of 23% of 1 year World Trade!


Is good to highlight that the NETT Fund/Spec short is largely due to a very large increase in Gross Shorts. They went from 67k lots to 155k lots, which is very large but only 42% of the largest Gross Short ever, in Sugar!


For the same period Index Funds sold only 14k lots (693k m/t) as they place risk mostly on the long side and tend to look at the notional value.


During this period of Fund/Spec selling, Producers took a step back, to a large degree, but Consumers didn’t hesitate much and bought all the way down, covering nearby needs and some medium term also. Consumers “missed” the boat in 2022/23 with the market rallying and kept stepping in to cover their needs in a rising market. Ok, but has the Fundamentals changed much?


Well, there was a small surplus for April/March 2023/24 of 3,3 mln m/t and at this stage there is potential for a small surplus in 2024/25 estimated at 1,3 mln m/t. When we consider World Sugar production at around 193 mln m/t (Raw Value) the surplus is tiny.


There are plenty stats on production, but no stats on demand. There are stats on exports, but not for all and there are some stats on imports, but not for many. So, estimating demand is a complex exercise that many players don’t do. They listen, they evaluate and then they trade.


Some subscribe to consultants like us (AP Commodities) and some prefer to do their own. Well, in my previous capacity (Commodity Trader) I used to say that speed of knowledge is vital, but one has to evaluate whether the flow of information is correct and likely to happen.


When comes to the World Trade, 61,4 mln m/t moved from A to B in 2023 and we expect a pick up in volume in 2024 by 2 to 3 mln m/t. Stocks at destinations were consumed in 2023 as prices rose and stocks were the cheapest alternatives. Lower prices will encourage some re- stocking, but as population and income grows, there will be some pick up in consumption also.


At the same time, some exporting Nations like Thailand and India should be exporting about 6,5/7 mln m/t less in 2024 and Mexico/Central America may also reduce exports in about 700k m/t.


So, as we could see an increase in demand and drop in exports of around 9,5/10 mln m/t, combined, who will make up for the difference? Well, Brazil started the year with 4,7 mln m/t extra stocks due to fantastic crop in 2023.


Brazil can fulfil half of what will be needed, but there are uncertainties on the current crop (April 24 / March 25) due to uncertainties on Agri yields (tonnes per hectare), Acreage and Sugar Mix (% of cane juice going for sugar production).


Depending on various scenarios, Brazil CS (Centre- South) current crop is estimated 1,8 mln down to 2,5 mln m/t up vs last year. So, Brazil can help further the World Trade by not holding back (not holding on to stocks) but it could be very challenging later in the year.


Brazilian sugar exports are strong, at times reaching close to 3 to 4 mln m/t per month and the weather has allowed for the harvest to pick up speed and sugars to be loaded. So, short term Brazil is making up for what the World needs and the World needs Brazil, that’s for sure.


SPEED OF KNOWLEDGE IS VITAL, BUT ONE HAS TO EVALUATE WHETHER THE FLOW OF INFORMATION IS CORRECT AND LIKELY TO HAPPEN.


8 | ADMISI - The Ghost In The Machine | Q2 Edition 2024


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