Cane production is expected to improve in Brazil as the Centre-South, which suffered a prolonged dry spell and frost in the winter of 2021, recovers their production. The weather is vital for their recovery as the cane needs rain, which has been good since the end of September. All going well, , the Brazil CS crop is expected to improve to 540/560 mln m/t of cane from 520 mln m/t this year (605 mln m/t in 2020). Depending on the Real and Ethanol prices (Gasoline prices in the international market), the sugar production is expected to improve to 34 mln m/t from 32 mln m/t this year (38,4 mln m/t in 2020).
We don’t yet know how the final Indian sugar production will be in 21/22 and the acreage/weather for 22/23, therefore we have plenty uncertainties ahead of us.
The current deficit in production and well-priced producers, reduced the natural “selling” and therefore sugar prices remain quite volatile and relatively strong, when compared to
the past years. Sugar is just one of the many Commodities which investors are trading and part of a “basket” of Commodities assets.
Since the beginning of the year, Investors reduced their nett longs in Agri Commodities in about 23% (+/- 600k lots) and in sugar they reduced by 158k lots, as of the 18th of November. The participation of investors (also known as Specs) in Agri Commodities reduced from 36% of the Open Interest in Jan 21 to 29%, but for Sugar they only reduced from 39% to 35%. So, they still like Sugar!
Coming back to sugar, the “low selling” flow from Producers, left the market dry of natural sellers and Con-sumers are having to deal with it, relying largely on “Spec” selling when it comes and having to absorb higher cost, not to mention higher freight rates and logistic issues.
As a consequence of higher costs, Consumers were discouraged to re- build stocks and forced many to use what they already had. We estimate that after a mix Sugar flow during the first 6 months of the year, the export flow during July/Sept 21 was around 4 mln m/t lower than same time last year.
So, as we head into the end of the year with lower stocks at destinations and uncertainties on how the next S&D may turn up, sugar prices are expected to remain volatile. We also need to watch how Crude Oil prices and the new Coronavirus variant will affect the markets, so far, it doesn’t look very good. With the current scenario, one would expect Consumers to be conservative on their market approach and Consum-ers to carry on pricing against market strength.
Alberto Peixoto E:
albertopeixoto@apcommodities.london T: +44(0) 7570 714 981
17 | ADMISI - The Ghost In The Machine | Q4 Edition 2021
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30
