Market Commentary

01/04/20: Sugar Market Morning Report

Good morning,

Another poor and depressing day for the sugar market. Prices dropped again as the macro took its toll. The market opened around unchanged and appeared to be reasonable well supported in early trading. Prices did eventually slip a little but remained within a narrow 10 point range for much of the morning. However, prices soon started to drop again once US traders started to get to their desks. With the BRL dropping to its lowest level against the US dollar good selling took prices down over 30 points by the close and settlement below the psychological 10.50 cent level. As to be expected NY spreads weakened with the KN ending 3 points down at -7 while the NV dropped 6 points to settle at -28. In London the front spread continues to climb ending $2 firmer at +21.80 as shorts scramble to cover. The QV also improved again to settle at +7.60.

Sugar more than any other agri-commodity appears to be suffering the most from the current global crisis. A double whammy of expected lower global demand and higher production from Brazil means the chances of another global deficit in 2020/21 now looks unlikely. Yesterday the BRL dropped to 5.205 against the US dollar. Crude prices still remain at their lowest level for over 20 years. The world is now flooded with crude oil so the chances of an significant improvement in prices looks unlikely for the time being. In Brazil ethanol prices have dropped due not only to the weakness of gasoline prices but also because overall fuel demand for cars has collapsed due to the country’s Corona lock-down. Therefore, the mills are likely to have no alternative than to produce sugar. For the past two seasons Brazil’s CS has produced 26.5 million tonnes as ethanol took preference. With the cane crush still capable of being around 600 million tonnes the mills have the ability to ramp up sugar production by, at least, 10 million tonnes. There are still a lot of unknowns least of all whether the Brazilian cane industry will be impacted by the country’s lock down measures. Currently, the cane industry is exempt as it is seen as an essential food industry but things could quickly change.

This morning the market opened unchanged but soon started to slip. Prices swiftly dropped 15 points with the front month dropping to 10.27. Currently the KN is unchanged at -7 as is the NV at -28. In London the KQ is a tad weaker but still at a very healthy premium of +21.20. The QV is around unchanged at +7.60. This puts the KK WP at 124.50 while the QN WP is valued at 100.50. The likelihood that Brazil will produce a lot more raw sugar means ample supplies of raw sugar against a distinct tightness of deliverable white sugar. This supply issue is seen to ease later in the year with the VV WP at 86.00 and further forward WP even weaker. It would appear the confidence has been sucked out of the raws market at the moment so prices are still very vulnerable to further losses especially as the macro is negative again this morning with a sea of red across virtually all commodities and equity indexes.



Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598




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