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EVENING SUGAR REPORT 2/12/2020

Wednesday February 12, 2020

World sugar futures surged higher on record volume today, with the March futures essentially the sole beneficiary of the day’s buying. March settled 37 higher at 15.78 after ranging from 15.34 to 15.90 while May settled just two higher and the back months from two higher to three lower. Outright traded volume was a record at 507,063 lots. March was clearly the focal point today – March/May traded from 36 over to 79 over and last at 72 over – and this on the fourth day of the mainstream index fund roll. March/May saw a staggering 118,307 lots trade as a spread as well as 9,136 March/May TAS between par and one under. March OI stood at 281,325 lots prior to today’s dust-up. May/July traded from 12 to 22 over and last at 17 over. Thus far during February, spot March has gained 117 points while red March has gained 38 points and the March’22 contract has lost 27 points.

Option watch: Sugar options turned in a substantial session with 93,800 contracts changing hands. Volume consisted of 61,309 Calls and 32,491 puts. Volatility took the move you would expect from today’s price action with gains throughout the board. Trades of note: March Calls accounted for 25,000 contracts with the March 15.50 Call trading over 8,000 lots and the March 16.00 Call over 6,000 lots. April 14.75 Puts stood out with 4,800 trading between 29-32 and in May it was the 16.00/17.00 Call Spread with 3,600 trading between 17-20. CSO’s: 500 March/May 90 Calls trade 7, 250 July/October flat/-10 Fences trade 10. ATM Vol’s: March 15.75 straddle 45-48 - vol 29.00, +3.5 % April 15.00 straddle 98-100 - vol 27.40, +1.8 % May 15.00 Straddle 132-135 - vol 26.75, +1.0 % July 14.75 Straddle 157-163 - vol 23.25, +.75 % October 14.75 straddle 187-190 - vol 20.85, +.30 % Option open interest: Calls 425,896 +927, Puts 305,679 +6,627 - total 731,575 +7,554

ED&F Man Holdings increased its projection for the global deficit by 10 % to 7.7 million tonnes, similar to the 7.0 million metric tonnes expected by Commerzbank and 7.0-8.0 million metric tonnes by LMC International. Mills in Thailand have been crushing 1.04 million tonnes of cane per day since reaching peak production pace on January 16th, down from 1.17 million tonnes in the same period of 2018/19, despite the opening of two new mills. Sugar output as of February 5th reached 6.37 million tonnes and APIC expects total output for the year at 10.2 million tonnes, with a variation of 500,000mt. Russia produced 7.5 million tonnes of sugar as of February 11th, with 10 plants still producing, according to Soyuzrossahar. Taking into account sugar from molasses and syrup, total output should reach 7.7 million tonnes this year, the union said. Beet planted area across Europe is likely to fall again this spring and the first confirmation came from the French Sugar Beet Growers Association (CGB), which expects a yearly drop of eight percent in domestic acreage. This would represent the second consecutive sharp fall in beet acreage in France after it was reduced by seven percent last year to 451,000 hectares. Platts anticipates a similar scenario in
the other main beet producing countries such as Germany and the UK, which would take total EU28 beet acreage in 2020 to 1.647 million hectares, down 1.4 % from the previous year.

In the USMCA region: US futures settled four higher in May at 26.60 and from unchanged to five higher in the back months. Renewed buying lifted July to 27.02 and September to 27.34 – May was dragged along on spread at 40 under July. Mexican sugar production in the week ended February 8th was72,598 tonnes lower than production in the same week last year – through 19 weeks the crop is now 541,338 tonnes lower than last year at 1.820 million tonnes. The narrative remains the same: area harvested was just 1.4 % lower than last year during the week, yet the cane crush was 20.27 % lower and sugar production is 26.52 % lower as both ag yields and industrial yields remain well below last year. Mexican sugar exports have picked up – exports to the US for consumption through February 2nd have totaled 163,389 tonnes, up 66,908 tonnes on the week. A further 11,478 tonnes shipped under Mexico’s IMMEX program, bringing the total for the cycle to 83,897 tonnes. As we started to write last evening before being technologically undermined, world refined sugar prices have appreciated dramatically in recent weeks. As US refined prices have been fairly static, the margins on imported refined sugar paying the high-tier duty have been pinched. The chart at left, which cover the period from November 1, 2019 to today, displays the US Midwest refined price (currently similar to FOB US cane refinery price) in red and the duty-paid price of world refined sugar (based on the spot #5 futures plus 16.21 duty plus a somewhat random 5.00 in costs to go from FOB in 50 kg bags to delivered to a relevant US port in totes) in blue. While actual cost will vary based on origination and destination points, margins have been diminished and there is little room for error or further margin erosion from continued improvement in the world price if high tier imports are to remain viable – unless US refined prices improve.

Regards,

JSG Commodities This email address is being protected from spambots. You need JavaScript enabled to view it. (203) 853 3000

JSG Indications: Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Raws: USNH: 26.00 26.60 27.25 27.05 26.50 26.50 Mexican peso to USD: 18.6207 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.

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