Sugar Futures and Market Data: 28th December 2022

Insight Focus

Raw and refined sugar futures continued to strengthen over the last week.
Speculators have extended their long positions in both the No.11 and No.5
Raw sugar producers also take advantage to add new hedges.

New York No.11 (Raw Sugar)

No.11 raw sugar futures continued to strengthen over the last week, reaching a 2022 record high of 21.18c/lb. However, since reopening on Monday, prices have slipped back toward 20c/lb.

By the 20th of December (latest CoT CFTC), with the market still rising, speculators opened 44k lots of new long positions, helping drive prices upwards.

For now, this means the net spec position extends further, now at over 210k lots long, its largest in over 12 months.

On the commercial side, raw sugar producers have capitalised on higher prices to add new hedges, extending the commercial short by 18k lots.

For raw sugar consumers this recent market strength has moved the No.11 much higher than where buyers had been happy to hedge at. As such the commercial short position shrank by 23k lots by the 20th of December.

The No.11 forward curve remains inverted until Oct’23 moving into contango to Mar’24.

London No.5 (Refined Sugar)

No.5 refined sugar futures also rallied over the last two weeks closing at 572USD/mt by Friday.

By the 20th of December, toward the middle of this most recent rally, refined sugar speculators were able to extend the net spec position by 1.5k lots.

Now over 37k lots long, this brings the net spec position very close to the 2-year high reached in September.

The No.5 forward curve remains heavily backwardated as far ahead as Aug’24, suggesting a slowly easing market tightness over the next few years.

White Premium (Arbitrage)

The H/H sugar white premium sharply strengthened to over 120USD/mt by close of trading last week.

We think re-exports refiners need around 120-130USD/mt above the No.11 to profitably produce refined sugar without physical premiums, therefore the current white premium is just within the threshold.

The refined sugar market is likely to be slightly undersupplied for the majority of 2023 and this is reflected in comparatively stronger K/K and Q/N white premiums which have moved above 125USD/mt.