According to Mr. Gurdev Gill – Agricultural Options Broker at Marex Spectron, the macro environment continues to weigh on sentiment, appetite to buy into the futures market for sugar and ultimately hurts emerging market appetite too, particularly exporters (see INR and BRL weakness). Marex Spectron foresees weaker prices to continue for flat price and spreads.
In the Indian wholesale markets, the demand has been scanty, though the dawn of summers are around the corner, nationwide sugar millers are held with pressure to sell their sugar quota of 21 LMT allocated for March 2020 which is 3.5 LMT lesser than March 2019’s month quota that stood at 24.5LMT.
In conversation with ChiniMandi News, according to a bulk buyer (who doesn’t want the name to be mentioned) shared that the demand supply dynamics of the end products is not playing right, demand is the weighty issue, therefore booking for sugar stocks haven’t been going towards the sugar industry from many of the bulk buyers.
Sugar CoT chatter
Report +110 to 120k
Live +80k to 90k
Marex Ethanol Parity
Spot: 13.48
BRL Pre-open
BRL futs point to 4.6436 (spot close 4.6165)
Macro update
Sugar focused on OPEC+ cut indecision. Bearish insights for demand growth and short term prices even if a cut is announced (esp if <1.5m bd) seems to be brewing.
Brazil Recap
Yesterday Brazil’s Economy Minister made it clear the BRL weakness was a function purely of Coronavirus not the country’s fundamentals. He did however outline a 2020 projection of 2% growth versus the ministry’s 2.4% which is apparently going to be revised lower.
We see the BRL pre open at 4.64 – the Finance Minister stated the BRL can weaken to 5/USD if his work is not effective. Meanwhile further auctions of 40,000 FX Swaps are taking place today. Recent intervention has had very limited impact on protecting the BRL from weakness.
Canaplan stated that Brazilian ethanol has a robust price outlook irrespective of the economy not being destined for 2% growth this year. They underlined a 7.9% jump in hydrous ethanol sales last year when GDP grew just 1.1%. Recent rains are seen as improving the prospects for the CS crop but may delay the cane crush.
Canaplan argues that despite better sugar prices this crop the strong demand may dissuade millers’ from increasing the sugar mix.
Gill also commented that, Marex Spectron shall be sharing an exclusive Brazil standalone report shortly which delves into their analysis of the Brazilian ethanol market and issues their proprietary projections that do not entirely agree with this standpoint.
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