Analyst Insights

• Mexico’s cane production was badly impacted by drought in 2019/20.
• This meant it was only able to produce very small amounts of sugar, ethanol and molasses.
• However, its molasses production should rebound next season as the weather looks favourable, but it will remain a net ethanol importer.

• Mexico was graced with above average rainfall in August.
• This eliminates the risk of drought and means Mexico’s cane crop should align with historical norms in 2020/21.
• With this, and the reduced US quota, Mexico may export more sugar to the world market next season.

• We expected greater than normal market volatility in the last quarter of 2020.
• It is ladened with geo-political milestones – a US Presidential Election, agreement of a post-Brexit trade deal and early insights about China’s next five-year plan.
• Against this background, President Trump’s positive COVID-19 test and need to quarantine, ahead of a closely watched election is likely to push up on market volatility.

• In the first two reports of this series, we placed Sustainable Agriculture (SA) in a global context and in relation to both global warming and the key greenhouse gases associated specifically with agriculture.
• We now introduce the concept of Sustainable Intensive Agriculture (SIA).
• The series is brought to you by Mark Oulton, former Manager and Trader at Cargill (18 years) and Global Research Manager at SGS (11 years).

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• We recently questioned whether the EU would be able to capitalise on China’s reduced apple production in 2020.
• The short answer is no, as China will produce 40m tonnes of apple in 2020, down 2.4m tonnes year-on-year.
• This smaller-than-expected production drop means it will still be able to meet a satisfy portion of global demand.

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• Last week saw a second consecutive week of good spec buying, with almost 20k lots bought and the gross spec long rising by 14.6k lots.
• Despite the strengthening price, the specs didn’t buy from industrial producers; it was instead facilitated by the closing of commercial long positions.
• This suggests that, with the gross commercial short around record levels, there either isn’t a great deal of sugar left to sell, or commercial producers are struggling get market access.

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• China’s Phase One Trade Agreement is still a tough one to fulfill.
• From the 36.5 billion USD committed in 2020, only 11 billion USD has been realised.
• It will certainly be a challenge to fulfill this in the last quarter of the year, and it will no doubt be bullish if China goes for it. 

• The Chinese government issued more raw sugar import licenses last week; 140k tonnes in total.
• This means 1.59m tonnes of additional licenses have been issued so far this year.
• The volume of raws quotas and AILs could reach 3.5m tonnes, but with import demand above 4m tonnes, refineries may have to carry 1.5m tonnes into 2021.