Czarnikow White Sugar Price Outlook  

• India remains the main risk to our trade flow view, unsurprising considering we expect 4m tonnes of currently unprofitable exports in 2019/20.  

 Quarterly Trade Flows

Whites Flat Price View  

Short Term – V’19

Over half of the August expiry tonnage has already been nominated out of Thailand. Considering the receivers have had to ship as far afield as West Africa the second half of the received volume might be much harder to find homes for.

The 427k tonnes of nominations are mainly flowing to East and West Africa with only a tiny portion flowing into traditional Chinese smuggling regions. It seems that despite the rally in the Chinese domestic prices smuggling controls are continuing to reduce flows. Not positive for 2H’19 Thai offtake.

The oversupply throughout 2019 continues to keep white premiums at levels lowenough to hurt re-export refiners reducing the availability of white sugar.Even with this constrained supply, slow demand for whites, which has been falling for almost 2 years, means that Thailand refined physical values are flat futures for the remainder of the year. We expect a similar tonnage of Thais to be available for the October tonnage. This is negative for the white spreads outlook.

Medium Term – Z’19

We think Thailand will have 1m tonnes of refined and white sugar to roll into Q1’20, probably to sell onto the domestic market. This will displace new crop production and is negative for our whites price outlook. On top of this Russia intends to export 700k tonnes of refined sugar to the world market over the coming season in order to draw down stocks.

Both Thai and Russian 2019/20 availability could be hampered by weather reducing yields, however India remains the key factor in the Whites market.

We think India will have 4m tonnes of exports available to the world market. Despite flooding which could cause damage to stocks and the crop we think stocks are plentiful enough to ensure exports are needed. The question then becomes how much the government want to push exports. With the world market having dropped since last season a larger subsidy will be needed to force large scale exports. The ongoing WTO case against last season’s exports may mean the government needs to get creative.

With India’s potential 4m tonne export program a major contributor to our trade flow surplus, should India’s support not be enough to ensure exports are viable then No.5 prices could rally to attract greater supply. Prices could rally to a point where some Indian exports are possible, or more likely where re-export refiners can be profitable to increase throughput and therefore availability. All eyes are therefore on Indian policy.

Long Term – H’20 Onwards

Global sugar stocks are huge. Until global stocks are drawn down to more normal levels, it’s going to be hard for the market to strengthen significantly. The main risk to the market is something which disrupts sugar production (e.g. weather) or logistics.