The domestic sugar market faces global influence

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VAIL, COL. — Global raw sugar prices will continue to influence domestic sugar prices “as long as the market remains status quo,” Jeffrey Dobridny, senior vice president, head of futures and options at JSG Commodities, told attendees at the 37 International Symposium on Sweeteners. August 1 in Vyali.

“No. 11 will continue to affect the price of No. 16 as long as high-level imports are a component of US supplies,” Mr. Dobridny said. “Next year’s prices are already pointing to that.”

#11 refers to the ICE Futures US New York global raw sugar future and #16 refers to the ICE Futures US New York domestic raw sugar future.

Mr. Dobridny said the “status quo” includes restrictions on Mexican sugar exports to the United States under suspension agreements, beet sugar production falling short of expectations, nearby supply chain constraints that are weighing on price levels, quota dependence on import of raw sugar at the end of the year. domestic demand for sugar is also growing.

Geoffrey Dobridny

The main influences on global raw sugar prices include large cash flows, partly related to inflation, the position of hedge funds, crude oil prices and the value of the Brazilian currency against the US dollar, Mr Dobridny said. He noted that commodity futures prices are up 19% year-to-date, but soft commodities (coffee, cocoa, sugar) are down 4.5%, with sugar in particular down 7.5%. Hedge funds in global raw sugar futures went from a large net long (prices expected to move high) at the start of the year to the largest net short (prices expected to decline) since 2020. Brazil is expected to increase sugar production (while reducing sugarcane production (ethanol production)) and India plans to export a record amount of sugar in 2021-2022.

High US sugar prices and tight supplies have made high-level sugar imports profitable amid rising global sugar supplies and lower global raw sugar futures prices, Mr. Dobridny noted.

High-level sugar imports are those imported at levels above the low-duty quotas. In July, the USDA estimated high-level imports in 2021-2022 at a record 278,000 tons. Mr. Dobridny said the “math” for 2023, based on May 2023 No. 11 futures, is 17¢ a pound plus a high-level duty of 15.35¢ and an estimated freight of 3.50¢. corresponding to a land price of 35.85¢ per pound. He expects the spread between the world price of raw sugar and the domestic price of raw sugar to remain in the range of 18 to 19 prices per pound in 2023, which will continue to stimulate high-level imports.

The domestic sugar market faces global influence

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