When comes to freight, slower commodity flow, largely linked to China importing less, and weaker economic factors, have impacted the freight market, on the downside, including containers and Break-Bulk vessels, but are still higher than the traditional rates.
Demand in general has slowed down in 2022 as consumers and importers don’t seem ready to re-build stocks, still waiting for better “prices” through Freight and Futures. As we are yet to see markets down to where they used to be before Russia/Ukraine etc… demand may remain close to home. Of course, any major supply shock could trigger some short-term buying but we are yet to see.
WORLD SUGAR TRADE The World Sugar Trade which rose from 52 mln m/t in 2019 to 62 mln m/t in 2020, dropped to under 58 mln m/t in 2021. During the first 6 months of 2022, the World Sugar Trade shrunk another 2 mln m/t. The 3rd Quarter may be similar at best, implying that we are down another 2 mln m/t in 2022, as of Sept 22 and Q4 2022 may not be stronger than 2021. So, as we go along, with similar to larger crops, one would expect prices to “encourage” greater demand, but the past has told us that greater demand tends to be triggered by fear or less supply.
The sugar scenario is similar to other commodities, to a certain degree, like grains pointing to greater crops, so far, as the weather and prices helped to increase acreage and yields, although not everywhere.
The perception the “glass is half full and not half empty” reduced the risk appetite by investors in commodities. The last CFTC Commitment of Traders report showed a desire to stay long commodities, but not as long as before.
The overall Open Interest has shrunk and the “Spec” element also shrunk to 20% from 28% one year ago. When comes to sugar they dropped from 32% one year ago to 22%, although they are increasing their nett longs again.
World Sugar Trade* Last 4 years 2019-22
30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0
2019 Jan/June Raws Whites 2020 Jan/June Total 2021 Jan/June 2022 Jan/June Raws Whites
*World Sugar Trade means the total amount of sugar going from exporting to importing nations (Excluding the EU internal flow) Source: AP commodities data
30 | ADMISI - The Ghost In The Machine | Q3 Edition 2022
ONE WOULD EXPECT PRICES TO “ENCOURAGE” GREATER DEMAND, BUT THE PAST HAS TOLD US THAT GREATER DEMAND TENDS TO BE TRIGGERED BY FEAR OR LESS SUPPLY.
So, with soaring inflation and higher interest rates and a downgraded world growth by the IMF, we are heading to a challenging 2023. Although everyone is “praying” for a quick end to the Russia/Ukraine situation, we still need to go through a cold winter, with limited energy and higher costs, not to mention lower spending power.
As we know, sugar is big business with an increasing influence by energy (mainly crude), currencies and politics, therefore prices will always be at the mercy of what is perceived to be cheap or expensive, with little space for replacement, so it is a matter of buying/selling now or later.
Alberto Peixoto E:
albertopeixoto@apcommodities.london T: +44(0) 7570 714 981
10 years average 2013-22
35%
65%
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