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Source: Guoyuan Futures Research

This April-May77freespinswinneramaThe sharp drop in internal and external sugar prices has largely digested the negative effects of Brazil and India.77freespinswinneramaAfter two rounds of decline, ICE raw sugar has fallen to an 18-month low. Although the short positions in ICE raw sugar futures and options held by speculators continued to increase in the recent week, there has also been some boost from speculative buying, resulting in a sharp rebound in the July contract of ICE raw sugar on May 20. The import procurement costs of the corresponding domestic sugar processing factories have increased, strengthening the role of supporting the domestic spot market. Zhengtang 2409 and 2501 short-term internal and external price difference repair logic, but Zhengtang 2409 is expected to be stronger than 2501. Although it is difficult to deduce the trend of sugar prices for the whole year of 2024, the world has entered a cycle of increasing production. Brazil has increased production for two consecutive seasons. India 2024Universe 25 is also expected to increase production and open up exports, which is still weak after the rebound.

I. Market Review

Since Zheng Tang's main force set a high of 6583 yuan per ton on April 1, 2024, it did not give market participants too much reaction time. On April 11, the fourth trading day after Ching Ming Festival, a smooth decline was launched. The extent of the decline was too large. It is basically close to the December low of 2023, with a drop of nearly 500 points, and the start time of the decline is one month earlier than previously expected. The main negative factors are Brazil's exploitation and expected to continue to increase production in the new season, India's production reduction is significantly reduced or production is flat and is expected to open up exports. The sharp drop in internal and external sugar prices from April to May has largely digested the negative impact of Brazil and India. ICE raw sugar has fallen to an 18-month low after two rounds of decline. although the net short positions held by speculators in ICE raw sugar futures and options have continued to increase in the recent week, there has also been some boost from speculative buying, resulting in a sharp rebound in the ICE raw sugar July contract on May 20. The import procurement cost of the corresponding domestic sugar processing plants has increased, which plays an important role in supporting the domestic spot market.

II. Analysis of the supply and demand pattern of global white sugar

two77freespinswinnerama.1 Brazil has a smooth start to the new crushing season and is expected to increase production continuously.

According to data released by Unica on May 15, 2024, sugar cane crushing in south-central Brazil totaled 34.57 million tons in the second half of April, an increase of 61 percent over the same period last year.77freespinswinnerama.3 percent, the total amount of ethanol increased by 51.86 percent to 1.51 billion litres, and sugar production increased by 1.84 million tons, an increase of 84.25 percent over the same period last year, which was higher than the market estimate of 1.73 million tons. The sugar ratio reached 46.96%, which was higher than that of 41.12% in the same period of the last pressing season. In 2024x25, Brazilian sugar exports in April were 1.8892 million tons, which was the highest in the last seven seasons. With the end of crushing in the Northern Hemisphere, we should focus on Brazilian sugar production and exports, which basically depends on Brazil for global sugar trade flows from May to September.

2.2 rumors of production reduction in India's 2023Compact 24 squeeze season are basically falsified.

In India, the reduction in production during the 24th crushing season in 2023 was basically falsified because unseasonal rainfall between October and December in 2023 increased sugarcane production in India. At present, sugar crushing in Mabang has ended, with a cumulative sugar production of 11.017 million tons this crushing season. During the last crushing season, Mabang produced 10.5341 million tons of sugar, an increase of 482900 tons, or 4.38%, compared with the same period last year. After the increase in sugar production in India, the Indian Sugar Mills Association (ISMA) called on the Indian government to liberalize the export quota of 2 million tons this season, lift the export ban during the 25th season in 2024, and relax restrictions on ethanol production in order to prevent sugar prices from falling.

2.3 speculative bears have been growing for several weeks with the influx of speculative buying.

According to the latest data released by CFTC, hedge funds and large speculators held 25891 net long positions in raw sugar in the week ended May 14, down 2670 hands from the previous week and a sixth consecutive week of decline and a more than four-year low. Non-commercial long positions were 209791 hands, an increase of 9728 hands over the previous week, while short positions were 183900 hands, an increase of 12398 hands over the previous week.

Although Brazil got off to a strong start to the new crushing season, India and Thailand produced much higher output than expected at the end of the 24th crushing season, and speculative short orders continued to increase, there was also a boost from some speculative buying, which led to a sharp rebound in the July contract of ICE raw sugar on May 20, with an increase in the import procurement costs of the corresponding domestic sugar processing plants, strengthening the supporting role of the domestic spot market.

III. Analysis of supply and demand pattern of white sugar in China

3.1 after a sharp drop in raw sugar, the import window outside the quota opens.

On May 21, 2024, ICE raw sugar closed at 18.57 cents per pound, with the RMB exchange rate of 7.2377. It is estimated that the estimated cost of customs payment of Brazilian sugar processing is 5177 yuan / ton within the quota, 6631 yuan / ton outside the quota, 5271 yuan / ton of Thai sugar processing within the quota, and 6754 yuan / ton of Thai sugar processing outside the quota. The mainstream quotation range of processed sugar mills is 6740-6900 yuan / ton, and the import window outside the quota is open, and the import volume is likely to increase in the later stage, including the whole year.

3.2 the sugar production and demand in China are booming in the 2023 and 24 pressing season.

By the end of April 2024, the national sugar production during the 2023 and 24 pressing season was coming to an end, with a total sugar production of 9.95 million tons, an increase of 990000 tons over the same period last year; a total sugar sales of 5.75 million tons, an increase of 600000 tons over the same period last year; and a cumulative sugar sales rate of 57.7%, basically the same as the same period last year. The monthly output of sugar was 380000 tons, an increase of 140000 tons over the same period last year, and the sales of sugar was 1.01 million tons, an increase of 240000 tons over the same period last year. The selling price of finished sugar from sugar industry enterprises nationwide was 6565 yuan / ton in the same month, up 182 yuan / ton and 23 yuan / ton over the previous month; the cumulative average was 6596 yuan / ton, up 731 yuan / ton over the same period last year. By the end of April 2024, the inventory of China's sugar industry is 4.2074 million tons, which is at a low level in the same period of nearly seven pressing seasons, which is only higher than the industrial inventory of 3.81 million tons in the same period of 24 pressing seasons in 2023.

IV. Outlook for the future

The sharp drop in domestic and foreign sugar prices from April to May has largely absorbed the negative impact of Brazil and India. After two rounds of declines, ICE raw sugar has dropped to an 18-month low. Although the short positions held by speculators in ICE raw sugar futures and options have continued to increase in the past week, there have also been some speculative buying boost, causing the ICE raw sugar July contract to rebound sharply on May 20, corresponding to the domestic processing sugar factory import procurement costs have increased. The supporting effect on the domestic spot market has been enhanced. Zheng Sugar 2409 and 2501 follow the short-term logic of repairing internal and external price differences, but Zheng Sugar 2409 is expected to be stronger than 2501. Although it is not easy to deduce the trend of sugar prices throughout 2024, the world has entered a production increase cycle. Brazil has increased production in two consecutive crop seasons. India is also expected to increase production in the 2024/25 crop season and may liberalize exports. After the rebound, it will still remain weak.

Writing date: May 22, 2024

Author:

Wu Jingchen

Research Consulting Manager

Futures qualification number: F3051432

Investment consulting qualification number: Z0013764

Han Guangyu

assistant analyst

Futures qualification number: F03099424