Monday, March 23, 2020

World sugar futures have recovered from some early pressure to begin the week slightly higher. May is last three points higher at 10.94, trading from 10.72 to 11.09 to this point. July is last one higher at 10.84. Just about 40,000 contracts have traded between May and July to this point. On spread, the May/July has traded from six to 11 over and last at nine points premium. The July/October has traded from 12 to 15 under and last at 15 points discount.
Macro Byte
Republicans and Democrats in Congress stumbled in their attempt to engineer a quick jolt to a sinking economy with a $2.0 trillion stimulus despite the rising coronavirus death toll, plunging financial markets and dire predictions of a deep recession. Negotiations to break the impasse over the stimulus legislation continued into the night Sunday after Senate Democrats voted to reject Majority Leader Mitch McConnell’s latest version of the plan.

Brazil’s Economy Ministry cut its 2020 growth forecast for the second time amid a rapid downward spiral driven by the coronavirus outbreak. The economy is expected to see flat growth, down from the estimate of 2.10% issued on March 11th.

Option Watch: k 11.00 straddle 90-93 vol 40.35 -.85% m 11.00 straddle 119-124 vol 35.25 -.50% n 11.00 straddle 142-146 vol 34.10 -.70% v 11.00 straddle 177-187 vol 29.90 -.40%

Trades of note: 275 k 9.00p trade 4 250 m/n 12.50 put calendar trades 4 249 n 12.00/10.00 fences trade -7/ flat

The Supplemental Report CFTC Commitment of Traders Report showed a net spec long position, exclusive of the index position, of 7,558 lots as of Tuesday March 17th. The market anticipated further long liquidation but perhaps not as much spec short-covering. Given the nature of the volatility in every market, there is a good chance traders have simply tightened positions. May futures traded from 12.65 to 10.85 during the reporting week, completing what has now been a 30% decline in prices. This week, the large speculators liquidated 53,060 longs (100,000+ in two weeks) and covered 20,889 shorts to be net short 5,519 lots, while the small specs covered 6,886 longs and added 4,537 shorts to be net long 13,077 lots. The index funds covered 13,095 longs and added 17,752 shorts to be net long 241,541 lots. During the week, the commercials added 18,962 longs and covered 35,944 shorts to be 108,525 lots short.

Over the course of the COT week, the U.S. dollar appreciated by 3.28% while the Bloomberg Agricultural Subindex fell by 7.05%. Throughout the remainder of the week, the U.S. dollar appreciated to its highest level since January 2017 – at the time, this was the highest level in the U.S. dollar since March 2003. The macro environment continued its downward spiral this week as coronavirus cases rise exponentially across the world and as businesses are being forced to shut. In the U.S. alone, the labor department reported a 30.0% jump in initial jobless claims on Thursday – Goldman Sachs is forecasting that number to grow to 2.25 million in next week’s report from 281,000. Treasury Secretary Steven Mnuchin told Senators that he believes the economic fallout is potentially worse than the 2008 financial crisis. According to J.P. Morgan Chase, gross domestic product in the U.S. is expected to shrink at an annualized rate of 14.0% in the April-June period while Bank of America and Oxford Economics both see a 12.0% drop - Goldman Sachs is expecting a 24.0% plunge. A flight to safety in dollar denominated assets has helped push the value of the dollar higher, which has also helped weigh on commodity prices. Markets are clearly discounting a sharp fall in the rate of demand for agricultural products. However, the potential for a supply shock as coronavirus starts to hit less wealthy nations is also a possibility. Volatility is likely to remain high in the near future with the specs mostly in risk-off mode.



India is likely to export 4.5 million tonnes of sugar in 2019/20, down almost a fifth from an earlier estimate, as a drop in global prices due to the coronavirus outbreak makes overseas sales unprofitable for mills, a senior industry official said. “There is no export parity after the recent fall in global prices. At this price level new deals won’t take place,” Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories Ltd told Reuters.

The world is facing a shortage of containers due to the restrictions in China which have just been implemented, including a decision by some ports to quarantine incoming ships for 14 days, according to Bloomberg. Market participants said this is causing delays, by up to one month, which is disrupting the supply chain. SeaIntelligence Consulting said 10% of the world's container deliveries could be lost due to the coronavirus, in line with what happened during the 2009 financial crisis. However, IHS Markit said that the container shipping industry was well prepared and therefore unlikely to face bankruptcies.

Regards, Jeff Dobrydney JSG Commodities This email address is being protected from spambots. You need JavaScript enabled to view it.



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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