Pool Update

Update as at 17 Nov 2020

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2020 Season Pool Prices (Pool valuation as at 5 Nov2020)

Forward Season Pool Prices (Pool valuation as at 5 Nov 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.

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Major Headlines

  • The spot ICE11 futures contract broke out of it’s recent range last night surging past 15 cents per pound, briefly reaching 15.58, the highest the spot contract has traded since late February which was when reports of the spread of the Coronavirus sent markets into a nose dive.
  • There are a couple of stories which are feeding current speculator bullishness when it comes to the sugar market. Firstly the macro economic outlook is suddenly a lot more positive with headlines announcing that a number of companies had successfully tested a Covid-19 vaccine over the past few days. Crude oil and equity markets saw a good bounce on this news.
  • Secondly, and perhaps most importantly, the market has still not had the confirmation it’s been expecting from India regarding sugar export subsidies for the crop currently being harvested on the subcontinent. Over the past two years India’s government has confirmed a subsidy scheme well in advance of the harvest however that has not been the case in 2020.
  • There seems to be a number of possible outcomes when it comes to India which range in likelihood.
    1. In the near future (prior to end of December 2020) The Indian government confirms export subsidies less than or similar to those of the previous year which would support sugar exports from India when the world price is between 13-15 cents per pound. This seems the most likely scenario which would possibly see sugar prices stabilise or come under pressure. The world remains in surplus supply for the foreseeable future given this situation.
    2. The Indian government delays announcement of export subsidies until the first quarter of 2021. This seems less likely as it would mean Indian sugar millers will have been producing Low Quality White sugar for the domestic market for a number of months rather than raw sugar for export, limiting the amount of exportable raw sugar that can be produced through the second half of the season. This would see support for the world value of raw sugar over the coming months as the world would be faced with a short term raw sugar deficit.
    3. The Indian government does not subsidise sugar exports. This would likely see raw sugar rally to a point whereby Indian millers can export at prices equal to or better than government controlled sugar prices in the Indian domestic market. This would be the best result for the world price which would possibly rally beyond 18 c/lb over the coming months as the market would be facing a longer term deficit. This also seems the most unlikely outcome.
  • The Aussie dollar has strengthened against the USD over the past number of weeks as that country deals with the aftermath of its recent presidential election. AUD/USD currently above 0.73.