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QSL: Market update week 8

Weekly Sugar Market Overview

Indicative ICE 11 Prices

SeasonAUD/MT*Weekly Change
2021$561.51+4.14%
2022$503.67+3.58%
2023$439.90+2.68%
2024$407.43+4.28%

* The ICE 11 contract is the world benchmark contract for raw sugar trading. These figures are indicative of available ICE 11 raw sugar prices as at the week ending 10 August 2021 and reflect the weighted average Australian Dollar/tonne price. The prices have been adjusted to include Over-the-Counter margin fees charged by banking institutions and so may differ from daily prices quoted by the ICE 11 Exchange or other marketers of Growers’ Economic Interest in Sugar. Values also do not account for any adjustments resulting from local Grower-Miller pricing arrangements. 

Raw Sugar prices

  • A further downgrading of the Centre South (CS) Brazil sugarcane crop saw raw sugar prices spike at the later stage of last week, pushing the front ICE 11 raw sugar futures contracts out to new life-of-contract highs. The October 2021 contract traded from a weekly low on the Tuesday of 17.74 USc/lb up to a new high of 18.92 USc/lb on Friday before closing the week up 4.3% at 18.68 USc/lb.
  • Now that the dust has settled from the third frost in CS Brazil cane regions, traders have once again reduced their 2021-Season forecasts, leading some to believe that Brazilian sugar producers may be over-hedged. One Asian-based trade house announced they have revised their Brazilian estimate down to 490-500 million tonnes of cane and 28 million tonnes of sugar, well below the current market consensus of 31-33 million tonnes of sugar.
  • To fill the supply gap created by a smaller CS Brazil crop, the market is looking to India to export additional tonnage, now made viable by rising ICE 11 sugar prices. Some reports suggest India has already committed to 800,000 tonnes of export sugar for the 21/22 Season. 
  • The Brazilian currency softened 1.8% across the week, with the Real trading at 5.24 vs the US Dollar. Firming ethanol prices in Brazil pushed spot ethanol parity to strengthen slightly at 17.58 USc/lb equivalent. 
  • As of Tuesday 3 August, speculators maintained their large net-long position of 213,000 lots, slightly down week on week. Given the significant rally on 5/6 August, this position is likely to be 10-20,000 lots larger on a live basis. 

Currency

  • For a second week in a row the Australia Dollar (AUD) floated in the 73-74 US cent range as global markets entertain further risk-on appetite. The AUD hit its weekly low of 73.29 US cents last Monday before trading to a high of 74.27 US cents on Wednesday and eventually closing the week almost flat at 73.56 US cents.
  • The Reserve Bank of Australia (RBA) met for its August meeting last Tuesday and, despite extended lockdowns in Sydney and a sixth lockdown in Victoria, remained optimistic towards Australia’s economic recovery. Markets were surprised when the RBA stuck to its plans of tapering its quantitative easing purchases from $5 billion per week to $4 billion per week starting in early September. 
  • The US labour market made headlines last Friday, printing significantly stronger data for the month of July. The unemployment rate fell from 5.9% to 5.4% and non-farm payrolls rose 943,000 jobs across the month. Average hourly earnings and the participation rate also surprised to the upside, leading markets to believe the Fed could announce a tapering to its own quantitative easing program sooner rather than later. 
  • In China, an outbreak of the Delta variant of COVID-19 put markets on high alert. Case numbers are now over 300 so far, spread across almost half of the 32 provinces. Brent crude oil prices weakened to $US72.51 per barrel after a Chinese analyst predicted a potential 5% decline in demand from this latest wave of the infection.  

2021-SEASON RAW SUGAR PRICES

This is a whole-of-season ICE 11 price chart for the 2021 Season, based on the current 3:2:1 pricing ratio applicable to QSL Target Price Contract growers. Source: Bloomberg

This report contains information of a general or summary nature. While all care is taken in the preparation of this report, the reliability, accuracy or completeness of the information provided in the document is not guaranteed. The update on marketing and pricing activity does not constitute financial, investment advice. You should seek your own financial advice. Nothing contained in this report should be relied upon as a representation as to future matters. Information about past performance is not an indication of future performance. QSL does not accept any responsibility to any person for the decisions and actions taken by that person with respect to any of the information contained in this report.

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