16 Mar 2022 | 22:36 UTC

Tight Brazilian white crystal sugar supply triggers cash premium surge

Highlights

White crystal sugar assessment at eight-year high

Balanced global trade flow, crop concerns support premiums

The spot premium for white crystal sugar shipped in containers maintained an eight-year highat a $99/mt premium to the May (K) Sugar No. 11 Futures March 16, just a few weeks prior to the official beginning of the Brazilian Center-South crop for 2022-2023 on April 1.

S&P Global Commodity Insights' Platts white crystal sugar assessment hit the $99/mt premium, the highest price seen since Sept. 23, 2014, on March 15, and it remained unchanged on the day as a seller talked the price at a $100/mt premium over the K future contract March 16.

Market participants reported that, despite the outstanding offer in the inter-trade market, there were just two possible sellers, who were not open to lower their asks to find a buyer.

Although the cash premium in the inter-trade market settled at the eight-year high for two consecutive days, the flat price, which is the combination of the front-month future contract of the ICE NY11 sugar future contract and Platts' assessment, settled at 507.74/mt March 16, down from the most recent high of $517.24/mt assessed March 7.

Fundamental scenario

Due to crop seasonality in Center-South Brazil, which officially starts April 1, it is normal to see an upward price movement in premiums for loading white crystal sugar in March and April. When the inventories were low and a few producers were able to guarantee the standard color of 150 icumsa, however, a further bullish tone was added to the current inter-crop period.

Market participants attributed the current rally in the cash premium to a combination of a reduced global supply and high container freight from Asian origins, which has been the main source of whites and has caused a potential delay in the beginning of the crushing season in Center-South Brazil. Sources estimated the delays were between 15-20 days.

"The white sugar trade flow is well balanced in the whole 2021-2022 global crop year, therefore any crop risk or logistical issue will potentially be translated in a tight supply," Luciana Torrezan, head of sugar analytics from S&P Global Commodity Insights, said.

The sugar global crop year started September 2021 and will end October 2022

Another relevant aspect was the tight availability in the Brazilian domestic market, where, according to sources, there will be small volumes available in the spot market.

"Two large Brazilian producers usually offer white sugar contracts for end of April or early May delivery, and this year they accepted to start to perform contracts just as from June," a sugar trader said.

In the European continent, the rally in the wheat and oil prices encouraged sugar beet producers to change their land usage for different crops that pay premiums over sugar.

Analysis from S&P Global expected total EU and UK beet acreage to drop by 0.7% year-on-year to 1.584 million hectares, but further decreases were expected for the 2023-2024 crop.

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