Insight Focus
- Raw sugar prices have dropped below the 18c/lb this month.
- With prices below the range, producers are less likely to hedge.
- However, producers continue to be well covered.
Market Price Action & Hedging Overview
- Raw sugar prices have dropped below 18c/lb, have now fallen out of the past year’s sideways range and now seem to be trending lower.
Source: Refinitiv Eikon
- This is negative for hedging as producer’ returns are reducing.
- The entire No.11 forward curve has fallen in the last month, reducing hedging opportunities for 2023 and 2024 too.
- However, producers have had a year of elevated prices and have been successful at selling the top of the range.
- They are therefore protected in the short term from the current price downtrend as they remain well-covered currently.
- While 2022 hedging is largely complete, there remains a fair amount of 2023 (and plenty of 2024) hedging to be done.
Centre-South Brazil
- Hedging for 2022/23 has almost finished and hedging for 2023/24 has advanced slightly by 6 percentage points.
- Producers continue to hedge even with prices lower in the range as returns in BRL remain strong.
Thailand
- In Thailand, hedging has advanced slightly compared to last month for 2022/23.
- For hedging to advance, No.11 prices would have to advance above 19c/lb.
Australia
- In Australia, hedging has remained steady compared to last month.
- Australia expected to have a strong crop for 2022/23; but heavy rains are pointing to average production levels.
- As a result mills are hesitant to hedge more volumes of sugar.
Central America
- Central America is in no rush to hedge as all their pricing is against the March contract.
If you have any questions, please get in touch with us at Will@czapp.com
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Explainers That May Be of Interest…
