Weekly Sugar Wrap
Written by Howard Jenkins, Head of Global Commodities
The main event of the week was the exciting news that a vaccine for Covid has been developed with impressive 90% ability in preventing the virus. This news sent the equity and crude markets soaring overshadowing the US election shenanigans. While there is still much work to be done before available for mass-vaccination it has brightened things considerable. Several other vaccines are also looking promising. Oddly, sugar seemed unmoved by the news as the recent volatility subsided and the market has became range-bound as all await any proclamation from the Indian government’s on their export policy.
As ever, conflicting reports continue to emerge from ‘Government sources’ regarding the export policy to be adopted. It now would seem 6 million tonnes of exports will be the aim but the all-important subsidy is, as yet, not forthcoming. Perhaps next week? Undoubtable, India will need to export otherwise the all-important domestic price will collapse adding to Mills financial woes. The government will be mindful that production should be robust in 2021/22 after another wet monsoon. If the subsidy is pitched too low then exports could be limited. One way or the other it is likely to immediately put a ceiling on prices which may trigger the funds to take their profits.
Unica released their harvest data for second half of October. While the figures were broadly in line with expectations it is interesting to note that total sugar production for the CS has already reached a new record of 36.41 million tonnes. There were over 200 mills still crushing at the end of October suggesting the final total could be around 38 million tonnes a record which is likely to stand for some time.
Today sees the December contract expiry in London. Currently, it looks likely the delivery will be a very large +600ktonnes. The usual debate will the ensue as to whether it is bullish or bearish. However, remember that the record delivery in October raws had the same debate. In hindsight many would now conclude it was bullish.
Uncertainty will continue to haunt the markets despite talk of vaccines. The sugar world awaits the Indian government – however, any announcement may well throw up more questions than answers.
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