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Thursday July 17, 2014

World sugar futures moved to a new five-month low today despite some reports of off take and a narrowing of the nearby discount. Prices settled 15 lower in October at 16.92 and from 23 lower in March to 18 lower in red March. Traded volume was 83,933 lots. On spread, October/March traded from 153 to 139 under and last traded at 141 under. March/May traded from 13 to 18 under and last at 16 under. Technically, there is little that could be construed as support between today’s low and some sketchy congestion in the 16.75-16.50 range. Reports of Chinese off take and block-sized buying of Brazilian inventories may lend support in the coming days – the charts are not likely to. The Brazilian real’s weakening to 2.2593 today adds additional pressure – the real settled at 2.2235 yesterday and at 2.1938 as recently as June 27^th when sugar was at 18.32. This nearly three percent drop allows a Brazilian producer tosell over 50 points cheaper in dollars and achieve the same return in reals.

Option watch: Aggressive selling in the October 16.50 Puts was the main feature today. October vol is 17.58, down .85 % and the March is 17.34, down .26 %. Volume on the day was 26,051 contracts. Trades of note: 2,200 October 17.50/16.50 Strangles trade 58, 1,700 October 16.50 Puts vs 16.93 trade 26 (vol 16.25 %), 1,000 October 17.50/17.00 Put Spreads vs 16.98 trade 32, 800 October 20.00 Calls trade 4, 750 October 16.50 Puts vs 16.91 trade 27, 300 October 16.00 Puts vs 16.96 trade 12, 1,250 January 17.50 Puts vs 18.34 trade 40, 650 January 17.50 Puts vs 18.36 trade 38, 1,500 March 19.50/17.50 Fences trade 3-4, 500 March 18.00 Puts vs 18.40 trade 75 and 250 March 19.00 Calls vs 18.35 trade 73.

According to Bloomberg, quoting an unnamed Brazilian official, the Brazilian government will take at least 10 weeks tocomplete studies to determine whether or not to increase the ethanol mix in gasoline from 25 % to 27.5 %. Brazil’s energy ministry told Bloomberg “the government is studying the subject, listening to all of the involved groups, but will only make a decision if it is economically viable.” MDA Weather Services reports that Brazil’s center-south is expected to receive one to three inches of rain over the next six to 10 days, which might delay harvesting activities, but will improve soil moisture levels. According to the Office of the Cane & Sugar Board, Thailand may produce 12.0 million tonnes of sugar from a crush of 105.0 million tonnes of cane. This compares to 11.29 million tonnes produced last year from 103.67 million tonnes of cane. Meanwhile, Indonesian production may reach 2.5 million tonnes this year, below a March estimate of 2.9 million tonnes, according to the Ag. Minister.

In the NAFTA region: US futures trading was active today as tradersworked to redistribute inventories, which are expected to be cumbersome from now well into the fourth quarter. September/November was recently active between 50 and 100 under, and attention shifted to the November/January spread to day. Over 1,000 lots of the spread traded at 50 points discount. September dipped to 24.30 today and settled at 103 under November. We would not be surprised to see the September nearer 23.50 and at a broader discount to the first quarter positions before the contract expires 15 sessions from now.

Regards,

Jenkins Sugar Group, Inc.

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Raws: “Fair value” #16 futures pre-close, or JSG estimate.

This report has been compiled for general informational purposes only. While efforts have been made to ensure accuracy, Jenkins Sugar Group, Inc. assumes no responsibility for errors and omissions.