World Sugar in flux - Forecasting the Market Movements

Transcription

1 World Sugar in flux - Forecasting the Market Movements Peter de Klerk Senior Economist 1

2 Source: The trouble with forecasting 2

3 cents per pound Sugar Fundamentals & Prices Production vs Consumption (k mt) Price Action No11 Raws 190,000 Surplus/deficit Production Consumption 35, ,000 30, ,000 25, ,000 20, , ,000 15,000 10, ,000 5, , ,000-5, ,000-10,000-3

4 Cents per pound Spreads are dealing with surplus c/lb = 13.1%; 6.4% CAGR 2.24 c/lb = 20.2%, 9.6% CAGR c/lb = 25.5%, 12% CAGR 10 Oct-18 Oct Jun 18-Jul 18-Aug 4

5 Millions Millions Who is driving the price? Gross Short Gross Long 0.4 Non Commercial Long Non Commercial Short Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 0 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 5

6 Lots of Futures cents per pound 400, , ,000 Net Spec Position No11 Futures , , ,000 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul

7 But. they are also in other markets Commodity Change in spec position since Jan (% of OI) Price Correlation Recent direction Market mood Coffee -14% 0.86 down bearish Cocoa 0.2% 0.89 down bottoming Kansas Hard Wheat 20% 0.83 flat bullish Corn 6% 0.86 flat recovering Soybeans 2% 0.77 sliding bottoming Sugar -11% 0.11 down bearish 7

8 And. there are currency markets Continued talk of Mexican deliveries Big swing in CS Brazil ethanol allocation despite Reais Indian Rupee steady EU exports unprofitable 8

9 Market outlook Spreads will continue to pay a carry (but not in the whites.) Speculative interest in sugar could wain. other markets have better stories Dollar strength / Reais weakness should cap upside But there are changes taking place in the commercial market 9

10 World Sugar in flux Forecasting the Market Movements 10

11 Export availability 30,000 25,000 20,000 15,000 10,000 5,000 0 Export availability in 2018/19 (kmt) CS Brazil production down 6mmt and Apr-Aug export down 3.3mmt Thai mills are allocating higher volume to whites 4.1mmt remelt Indian mills not selling at current prices 11

12 CS Brazil Ethanol / Sugar Export Production totals 2014/15 32 mln 2015/ mln 2016/ mln 2017/ mln 2018/19 30 mln-ish 12

13 Other ethanol thoughts Oil looks steady near $70 WTI and Brent are diverging eliminates Shale Gas Other ethanol programmes remain molasses-focused but are expanding 13

14 Key drivers for refiners freight and WP 14

15 and import demand 7,000 6,000 5,000 4,000 3,000 2,000 Indonesia licences are not price-sensitive China raw sugar imports now on level playing field Bangladesh / UAE steady 1,000 0 EU imports disappoint 15

16 Domestic Prices 1.25 Domestic Prices in Local Currencies ISA price has fallen by 45% Jan-17 Jul-17 Jan-18 Jul-18 ISA DP China, ZCE front-month India, NCDEX M200, front-month Mexico, Estándar Mexican consumers have not seen any change Indian consumers have seen a 17% reduction Chinese consumers get a 29% reduction, but import taxes have increased. 16

17 Changing Trade Landscape From WTO to UN SDGs Bilateral Trade Agreements to binary trading routes Single-origin traders / brokers => inflexible trading books 17

18 The traders dilemma 18

19 Conclusions: Market in flux Consolidation / Rationalisation Export (bilateral) Surplus Price / Spreads Ethanol 19

20 Forward View No obvious increase in industry capacity although de-bottlenecking continues No weather guarantee Indian swing-cycle returns 20

21 Thank you Peter de Klerk Senior Economist 21