ChiniMandi Exclusive: “Views on Global Sugar Market” by Gurdev Gill – Agricultural Options Broker – Marex Spectron

With global sugar traders forecasting a deficit of the commodity, the entire industry is seated back to visualize how the global sugar industry would take shape with most commodities suffering at some level due to the corona virus outbreak and other prominent factors affecting the commodity in particular.

In a conversation with ChiniMandi, Mr. Gurdev Gill – Agricultural Options Broker at Marex Spectron, a leading commodity broker with extensive range of services and intellectual content across all commodity markets shared his views on a few aspects that people currently seek to comprehend.


Q. According to sources 920 KMT has been delivered against the NY#11 March 20 contract, how do you view the expiry?

A: An expiry usually does not signify much. After all, it is only sugar changing hands. The receiver had presumably made their profit out of the futures spread (selling out when the spread got wide). Few expected such a large tonnage of Brazils available (could be read bearishly on that basis). But ‘money talks’ and the huge premium made the sugar available (price is a good signal in efficient markets).

Q. Given the recent rally to 15.9 c/lb and then fall in the prices in run up to expiry, in what range may the market trade in next 2 months?

A: We do think it has to stay in a range. That range will be dictated by crude/rbob. On fundamental grounds they are now very cheap. We do not expect sugar prices to follow down as far as crude/rbob have fallen, for the simple reason that the Brazilian harvest does not really get under way till May and goes on till November, so plenty of time to wait and see if the energy complex recover – opec meeting this week is key short term. For more information on our spot and forward parities please reach us directly. Marex ethanol parities – 03rd mar. Spot: 14.51 (pump ratio @ 70.16% sp). Brl pre-open: futs point to 4.4752 (spot close 4.472). BRL is also key for the cost of gasoline imports in Brazil not just the improved price that translates in sugar prices.

Q. What are the dominant factors do you think would influence the May-20, as we have seen cut in 19-20 Thai and USA crop, supported the recent rally?

A: Very dependent on energy for obvious reasons (given that the world needs some but not all of the approx 11 million tons extra sugar which Brazil can produce if they go from min sugar to max sugar), so the sugar price is more or less condemned to stay fairly close to the ethanol parity.

Q. Do you think, we would see impact on china’s sugar consumption or their sugar imports due to the corona virus outbreak?

A: We hear that there is impact on both; pipeline problems may decrease consumption while lack of labor is decreasing crushing, processing and replanting. We are still cautiously optimistic that we can see some recovery but like the virus in general – the situation is fluid. The Jan-April run is key.

Q. On whites market, what is the outlook? What could be price range for short term (3 months) and long term (6 -9 months) ?

A: The fact that there was a real ‘squeeze’ on London, in so far as there were shorts of futures who could not find deliverable sugar, proves that the white premium had been too low for too long, and had cut off tolling. It takes time to fill the gap, so we formulate the current $80/90 range will continue for some time, especially since raws are now at a spot premium, not discount.

Q. What would it mean for Indian whites exports? Do you think Indian millers seem to be rightly positioned to maximize exports?

A: We don’t think it has any major effect. We believe in partnership with our partners, MEIR, thinks that exports will be very close to 5 MMT regardless of the world sugar price.

Q. Where do you see the Thai remelt this year? Do you think, far east countries may buy Indian white sugar, if yes, how much whites demand do you see from far east countries coming to India ?

A: Tough question – Thai remelt would be 3 MMT. As for Indian white exports, they will come out whatever happens, and their premium/discount to the world market will be dictated by supply/demand.


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