Pool Update

Update as at 21 May 2020

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Sugar. While all care is taken in the preparation of this report the reliability or accuracy of the information provided in the document is not
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2019 Season Pool Prices (Pool valuation as at 14 May 2020)

Forward Season Pool Prices (Pool valuation as at 14 May 2020)


Net AUD/T (IPS) subject to change with changes in the ICE 11 market price affecting unpriced exposures, movement in the AUD/USD exchange rate and also due to  movements in the Shared Pool.


Major Headlines

  • After falling to a contract low of 9.21 cents per pound as recently as April 28th the July raw sugar futures contract has now bounced 2 cents per pound trading as high as 11.30 on Wednesday 20th May.
  • The minor recovery has been driven by improving global oil prices as production cuts by OPEC+ and the USA have begun to take effect. Similarly oil demand has started to pick up as more countries emerge from lock down.
  • Currently West Texas crude oil is worth US 33 per barrel (June futures contract). This time last month traders were watching the futures price in disbelief as the value of the May contract plunged 300% in one day deep into negative territory. US oil production was at a record high in March, this has been cut by 1.5 million barrels per day or around 11% in just 6 weeks with further cuts expected.
  • Brazilian millers are expected to use 44-46% of their cane throughput to produce 35-36 million tonnes of sugar this year. Last year they turned 34.5% of cane to sugar production to produce more like 26m tonnes. The Brazilian harvest kicked off on April 1st and is progressing well with sugar production matching forecasts.
  • All eyes are on the port of Santos near Sao Paulo which handles most of Brazil’s coffee, sugar, soybean, corn and cotton exports. One of the key concerns among sugar trading houses is around Brazil’s logistical ability to export the expected huge crop as some bottlenecks are already developing just two months into the season. The average waiting time for sugar vessels to load at Santos is already 27 days between arrival and expected sailing date. Add Covid-19 to this mix and there looks likely to be some hiccups for Brazilian exports in the weeks ahead which could prompt sugar price rallies.
  • Thai sugar millers have sounded the alarm amidst on-going drought conditions. The Thai Sugar Millers Corporation says if the sugarcane production area in the northeast sees below average rainfall during the wet season (May to October) sugar output will fall to record lows. Most analysts at this stage still see a crop of around 75 million tonnes of cane for 2020 which is the same as 2019 however markedly less than the 130 million tonnes cut in 2018.
  • There are reports that the Indian government is considering ways to get the sugar industry to reduce sugar production and exports. The Covid lock down has placed enormous pressure on India’s budget, so it may be that subsidising exports to a very low-priced global sugar market is not seen as an absolute necessity (the WTO case against India’s exports also continues in the background). The government is pushing hard to get increased adoption of ethanol incentives to take cane away from sugar production and into bio fuel.
  • MSF currently expects front-month sugar futures prices to trade 10-12 cents over the next three months and 12-14 cents in the coming 6-12 months. In Aussie dollar terms that’s $330-$400 per tonne in the short-term and $400-$470 longer term at today’s AUD/USD exchange rate of 0.6597.