Weekly Sugar Wrap
Written by Howard Jenkins, Head of Global Commodities
The market managed to register fresh eight and half months highs earlier in the week. This was not because of the long awaited Indian government declaration on their export policy – their silence is deafening but the macro impact on more general optimism over the fight against Covid. Like buses, you wait for ages and then two vaccines turn up at once. News that a vaccine developed by Moderna Inc. is effective in preventing the virus buoyed the markets although not to the same extent as the previous week’s announcement from Pfizer. While news of the first vaccine saw sugar unmoved this time it joined in the celebration pushing up to its highest level since 20th February. Continuing uncertainty over India had sellers taking a cautious view causing the funds to pay up to get the volume done.
As expected the December expiry in London saw a large delivery – second biggest ever at 618k tonnes. While traders got the quantity right there was surprise that a third of the delivery was from Algeria and the largest origin was Guatemala. The rest was made up of Brazilian. Seeing a North African refiner delivering could be seen as a lack of demand but it may have been a result of thin trading conditions prior to the expiry.
The EU is seeing the damage a dry spring, wet harvest and lack of effective pesticides has had on the beet crop. French farmers are seeing yields at the lowest level since 2001. While the French crop seems to be hit the hardest other EU producers have seen yields hit and analysts are now see total production struggling to reach 16 million tonnes a far cry from the 23 million tonnes produced in 2017/18 when the EU farmers were revelling in the ending of the EU sugar policy.
Emphasising the need for an export policy the Indian cane harvest is off to a cracking start. As of the middle of this month a total of 1.41 million tonnes of sugar has been produced nearly three times as much as the same time last year. While it is far too early to make any solid predictions about their total output it could conceivably hit a new record.
The sugar has remained stifled over the past couple of days as trading volumes collapse with traders sitting on their hands awaiting clarity on Indian exports. It seems a never ending story but the ending is likely to determine sugar prices well into next year.
Contact the ADMISI Sugar Desk team:
Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg
Phone: +44(0) 207 716 8598
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