Analysis of World Sugar Futures

Analysis of the sugar industry by Frank Jenkins of Jenkins Sugar Group.

World sugar futures turned in a mixed session: March posted a higher low and higher high en route to a 47 higher settlement, but the futures failed upon approaching the 40-day moving average (27.42 last night, 27.51 tonight) and shed 20 points after the official settlement. Prices finished the afternoon 27 higher in March and 19 higher from May through October. Volume was 124,165 lots, including 27,377 lots of March-based spreads. On spread, the March/May traded from traded from 85 out to 97 over and then eased back to finish the session at 88 over. The May/July traded from 240 over in to 201 over and last traded at 202 over.

Talk in the trade is that India bought three prompt cargoes and two cargoes of March–July period raws on the recent price decline. The current bull market has caused some interesting clashes of interest. Brazil’s largest sugar and ethanol marketing company, Copersucar, has called the additional export of 500,000 tonnes of out-of-quota sugar authorized by the EU a “flagrant violation” of WTO rules. In the Philippines, according to local research group Ibon Foundation Inc., the export of nearly 115,000 tonnes to the US earlier than is typical has lead to consumers experiencing low supplies and high prices. The country will import 150,000 tonnes as a result. Mexico’s announcement of an import quota right in the guts of the domestic crop has raised more than a few eyebrows. Russia imported 1.25 million tonnes of raw sugar in 2009, 48.2 % less than in 2008, according to the federal customs service. The country has finished the 2009/10 beet sugar refining season, processing 3.22 million tonnes of white sugar, down from 3.55 million in 2008/09. In Thailand, cash premiums for high-pol raw sugar for March-May shipment were bid at 50 points over the March New York contract and offered at 70 points premium. Technically, the March failed upon approaching the 40-day average and will need to move back above the 40-day (27.51), the 50 % retracement of the recent sell off (28.05) and the 10- and 20-day averages (28.18 and 28.39 respectively) to rekindle fear in the shorts and renew greed in the longs.

In the NAFTA region: US futures trading was extremely quiet in the wake of yesterday’s expiry, the announcement of Mexico’s import quota and the release of WASDE numbers this morning. Today’s USDA release did little to shed light on the USDA’s likely course of action (please see our earlier report). Mexico’s announcement served mainly to widen the whites premium to $155 on the March arb and to nearly $150 on the May arb, and perhaps to reassure the USDA that Mexico’s eventual imports will total the 720,000 tonnes projected in the S&D. Mexico’s economy minister stated today that Mexico will open additional import quotas once the current crop finishes in May. Last year the crop stretched into the first weeks of June, and the first imports were announced on September 7th, so we are clearly swimming in uncharted waters.

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