• Trade bids for 2020 Thai raws were below expectations at yesterday’s B Quota tender.
• This may reflect a reduced risk appetite from major trade houses.
• This was the latest start to Thai B Quota tenders in more than a decade; the entire 2020 crop is still unhedged.

Low Bids for 2020 Thai Raw Sugar  

• The Thai Cane and Sugar Corporation sold 48k tonnes raw sugar at B Quota tender yesterday.
• The TCSC was offering 48k tonnes of March/May 15 shipment hi-polarisation raws, and 48k tonnes May/July 15 hipols.
• The five most-active trade houses in Thailand offered between 0-37pts premium for the March/May 15 hi-pols and 8-43pts premium for the May/July 15 hi pols.

• The TCSC had been hoping to achieve at least 55pts premium over the futures for these sugars.
• They therefore awarded the March/May 15 tonnage to Glencore at a 48pts premium, and chose not to sell the May/July 15 raws at all, even though ETG had offered 50pts for 12k tonnes.

What’s Going On?  

• We believe the major trade houses bids were low because their risk appetite to operate in Thailand has reduced this year.
• This follows heavy oversupply of raw sugar, which has depressed Thai physical values.

• Wilmar recently delivered 600k tonnes of Thai raw sugar into the July’19 expiry, effectively reducing the physical value of these sugars to flat futures.
• Thai raws usually trade at a premium to the futures because they can be sold rapidly into East Asia, which is in raw sugar deficit.

• Interestingly, Sucden, one of the July receivers, bid at flat futures for the March/May 15 raws at this B Quota tender.
• This was presumably done to underscore the damage Wilmar have done to the Thai sugar industry by delivering raw sugar into a futures expiry.

Why Are B Quota Tenders Important?  

• B quota tenders set a benchmark price for sugar exports which feed into the cane prices mills must pay farmers.
• Mills therefore try to match or beat B quota levels achieved by the TCSC.
• B quota tenders are often held far in advance of the shipment window being offered.
• However, this was the first tender for 2020 sugars from the TCSC.

• Once the tender is complete, the TCSC can place futures hedges in the market; the entire 2020 raws crop is currently unhedged.
• This means we may see additional selling pressure in the March 2020 contract if it strengthens further.
• We expect the TCSC to continue to tender raw sugar through the rest of this year, and the Thai mills to try to match TCSC hedging levels when the market strengthens.