• The Q/N and V/V in 2020 are approaching the $70/mt area where we think re-export refiners may start hedging. 

Raws Spreads  

• The raw sugar market is oversupplied across all major origins. 
• We think that Thai and Central American availability is pressuring the V/H spread beyond Brazilian cost of carry. 
• The oversupply in Thailand is likely to be carried into 2020. However, if the raws delivered against the July expiry cannot be shipped, the scale of the Thai oversupply could be negative for V/H. 
• Oversupply of Brazilian raws means the 2020 spreads should trade close to cost of carry (15pts per month). 

• To the upside it’s hard to see any No.11 spread trading at a premium for a prolonged period. 

Whites Spreads 

• The refined sugar market is oversupplied until at least the middle of next year.  
• For this reason, we believe the white sugar spreads should incentivise warehousing of sugar at major refined origins. In Thailand and Central America we think this could be close to $3 per month. If India subsidises exports again in 2020, we’d expect the spreads to weaken beyond these cost of carry levels. 

• To the upside we think the spreads are unlikely to trade at a premium until the refined sugar surplus is resolved. Watch out for Indian policy around export subsidies – if India cannot export refined sugar in 2020 the spreads will strengthen.

White Premium 

• The refined market is oversupplied.  
• While this is the case it is hard for the white premiums to exceed $70/mt. Above this level re-export refining becomes increasingly profitable, bringing extra unwanted refined sugar to the world market.

•  Similarly, we don’t see a reason for the white premiums to trade too far below $50/mt as this doesn’t remove much supply from the market.