COUNTRIES LIKE CENTRAL AMERICA, INDIA AND AUSTRALIA ARE EXPECTED TO PRODUCE SIMILAR CROPS. THE EU AND THAILAND ARE EXPECTED TO INCREASE, SO ON AVERAGE, THE GAINS OF OTHER NATIONS MAY OFFSET WHAT BRAZIL MAY NOT HAVE, BUT NOT EVERYTHING.


SO, WHAT ARE THE SUGAR


FUNDAMENTALS BEYOND BRAZIL? At the present moment, many other producers are likely to have a decent crop, similar or higher than the previous one.


Countries like Central America, India and Australia are expected to produce similar crops. The EU and Thailand are expected to increase, so on average, the gains of other nations may offset what Brazil may not have, but not everything.


India is expected to produce 30,5/31 mln m/t vs. 30,6 mln m/t during last crop. The EU may surprise with 17,5 mln m/t up from 15,4 mln m/t and Australia similar to last year at 4,3 mln m/t.


The wild card is still Thailand. The last Cane harvest was 66,5 mln m/t and the coming crop is estimated as low as 85 mln and to as high as 100 mln m/t of Cane. The range would mean a Sugar production 1,9 mln to 3,5 mln m/t higher than the previous crop.


In terms of Sugar S&D, we are expecting a small deficit for April 21 / March 22. Our latest crop and consumption estimates point to a marginal deficit (103k m/t) with further risk of a greater deficit, depending on how “bad” the Brazil CS harvest may end up. There is a risk that Brazil may be worse and others not improve as much.


The previous year S&D was a marginal surplus of 1,5 mln m/t, so World Sugar stocks are not necessarily up and, in some countries, lower than others.


Given the weaker exports from Central America and Thailand, stocks are marginally up but due to stronger exports from India or lower production in the CIS and EU, their respective stocks are lower at very low levels.


We revised our sugar consumption for April/March 20/21 and found it to be 1,01% lower YoY, so despite the lockdowns and economic downturns, Consumption wasn’t much affected. As we go into April/March 21/22 we see a pickup in consumption by 1%.


SO, HOW IS THE WORLD SUGAR TRADE? It seems that 60,5 mln m/t moved from Exporting to Importing Nations in 2020 an increase of 8,2 mln m/t vs. 2019. We estimate 38,7 mln m/t of Raw Sugars and 21,8 mln m/t of Refined/White Sugars.


The first semester of 2021, which started stronger YoY, slowed down to a certain degree, but total volume may end up close to 27,6 mln m/t, similar to last year. We see a pickup in Raw Sugar exports to 18 mln m/t, up 747k m/t and a drop in Refined/White Sugar exports to 9,6 mln m/t or 1 mln m/t lower YoY.


Higher Futures and freight rates is causing importers, where possible, to slow down their imports, in hope of better prices later on. Thus far it hasn’t been the case.


SO, WHAT ARE INVESTORS UP TO? The latest CFTC report (as of the 7th of Sept 2021) showed the outflow of Investors picking up speed again. When we look at Agri Commodities, we see a nett long of 2,1 mln lots, down from 2,8 mln lots early in the year and at the lows for the year so far. Does it mean they don’t like Agri Commodities as much as before?


Well, that is the case for some Commodities like Soybeans and Corn (down 359k lots) but for the Softs (Coffee, Cocoa and Sugar) they are only down 41k lots with Sugar down 27k lots at 414k lots NETT LONG or 21 mln m/t!!!


It’s our view that unless “Investors” and Traders decide to sell Sugar, there is no pressure as Consumers are well priced and would prefer to keep selling, what hasn’t been sold, on a scale up basis!


On the other hand, we notice that Consumers are dealing with their needs and getting on with their demand, perhaps not so enthusiastically but in the short term they don’t seem to havemany options.


We estimate that Producers priced 22,2 mln m/t since Sept 20 at an estimated average of UScts/ lb 16,31 while Consumers priced 24 mln m/t at an estimated average of UScts/lb 16,56, so similar. As we speak, Sugar nr 11 March 22 Futures is trading at 20 cts!! When we look 1 year ago, Producers had priced 43,4 mln and Consumers 22,7 mln m/t as of Sept 2020, about 4 cts lower.


So, if we can resume what is happening, Sugar Fundamentals imply an equilibrium in terms of supply and demand, with Producers well priced, willing to price scale up, Investors quite long and willing to hang on, so far! Consumers will have to deal with a much “drier” on offer market until Investors see greater crops and pressure or a turbulent macro environment.


Alberto Peixoto E: albertopeixoto@apcommodities.london T: +44(0) 7570 714 981


19 | ADMISI - The Ghost In The Machine | Q3 Edition 2021


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