Sugar has failed to react to external market bearishness. Both main energy benchmarks, WTI oil and RBOB gasoline, registered substantial losses to their prices during last week, reducing about 9% each. This decline was attributed to the EIA's most recent report indicating a decline in gasoline demand and the news suggesting that Russia might soon lift its diesel ban. The sweetener resilience appears to remain supported by tightness in the Northern Hemisphere's availability, and, more recently, precipitation increases in the Center-South, which could partially disrupt sugar export flows. We should keep in mind, however, that OPEC+ has opted to maintain its existing oil output policy, adhering to the commitment made by Saudi Arabia and Russia to extend voluntary supply cuts until the end of the year. This means that the correction to the energy complex might be short-lived, and its reaction could add to sugar fundamentals, providing support to prices.
Source: Refinitiv, hEDGEpoint
In our previous report, we discussed that fundamentals still point out supportive prices in the short-medium term – while we focus on the March contract, at least. But improvements to the EU, Ukraine, Russia, and Brazil might prevent the previously expected surge in prices, adding a cap to future gains. Note, however, that this doesn’t mean that prices will start correcting anytime soon: there is still a high deficit expected for Q1/24 given India and Thailand’s lower availability.
Speaking of, Thailand is the main theme to this report. Why and how does the country contribute to the elevated sugar price range we’ve been experiencing?
