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The Sugar Bulls Are Running. We Think.

The seminars held during Sugar Week in NYC spoke to a volatile and unpredictable sugar market with a trend toward an upside in prices.

Some major take-aways:

World raws trading 25c+ means has no direct correlation to cost of production/fundamentals to help guide us. Since the market does not trade often at these levels it makes it very difficult to forecast and things tend to be more volatile (1c+ day trading ranges in the #11's have become common). At such high prices, margin stress must also be factored into the equation, increasing both volatility and unpredictability.

It’s not an easy time to be a buyer. Often, the market has been moving faster than buyers can get internal approvals. It’s not only the high price of the market that they are grappling with, but the speed at which it is elevating.

With the exception of Brazil the rest of the world is not having good sugar crops. Looking forward there is concern that a transition to El Nino may cause drier weather in Asia impacting the important world crops in India and Thailand crops.

Brazil had a record soybean crop which competes with export capacity. So even if Brazil has the sugar, getting it out of the country along with other exports could cause major port congestion issues.

Mexico is the largest exporter/supplier to the US market and their spot market is trading over 70c/# and booking for 2024 crop is proving to be a slow-moving process. Many believe the MX crop to be much lower than what the USDA is citing in the WASDE and that they will likely fall short of their US export quota allocations.

We heard that the argument could be made for world sugar/#11s to trade anywhere from 20-30c/# this year which indicates even the analysts have no idea where things could go. In the current US market high tier structure, US raws would trade at a ~20c premium to the world/#11s. We don’t see that changing anytime soon.

This is not a great picture for sugar buyers, but our crystal ball is mere glass, so anything could happen. However, taking everything into account, there appears to be many more bullish factors in play than bearish in the current market both world and domestic US.

The CSC Sugar Trading Desk and Sugaright Sales Team are doing all we can do to keep you informed of market trends, and to offer price efficiencies when we can; however, we all know that weather, politics, consumer preferences, and other factors can impact the sector in unpredictable ways.

Stay safe out there.


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