- Unconventional origins have availability against the Oct’19 and could cause further V/H weakness.
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 and Argies are rumoured to be available too.
- 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).
Hedging Guide
- To the upside it’s hard to see any No.11 spread trading at a premium for a prolonged period.
5 Year Historical Spreads
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.
Hedging Guide
- 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.
5 Year Historical Spread Charts
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.
The Amount of Refined Supply Available to the World Market vs White Premium Level
- 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.
Hedging Guide
5 Year Historical White Premium
