There are two types of sugars, one produced from sugar cane, which represents the largest part of the sugar traded in the world, and the other from beet. Sugar is a raw material used in food, but also as a component of ethanol, a biofuel that is currently expanding.
The only sugar traded on the New York Stock Exchange is brown sugar, made from sugar cane production. White sugar is traded on the London LIFFE market
Brazil is the world’s leading producer followed by India, the European Union and China respectively.
Graph: Sugar Producing Countries in 2015
Report December : Declining prices giving way to a strong recovery at the end of the month.
December was a busy month for sugar on the world market. The price of crude oil first fell by 9.73% in the first half of December. Indeed, the price of the latter went from 15 cents per pound (cents/lb) in New York to 13.670 cents/lb in the space of 2 weeks. It therefore reached a low that had not been seen since last September 26 (13.240 cents/lb).
Sugar did not show a similar trend during the 2nd half of December. Indeed, during these 2 weeks it experienced a significant increase of 10.8% breaking even the 15 cents/lb bar ( 13.670 cents/lb to 15.150 cents/lb) allowing it to completely erase its fall in the first 2 weeks of the month.
Graph: Price per pound of raw sugar in New York For the month of December in $
In London, the Tonne of White sugar followed almost the same path as the price of New York Raw Sugar since the price dropped by 7.3% from $388,900 per tonne ($/t) to $360,500/t. And in a 2nd time, the 2nd fortnight of December there was an increase, in the order of 9.49%, from $360,500 per ton of white sugar to $394,700 per ton.
We started January slightly higher for raw sugar than at the beginning of December (+1% to 15.150 cents/lb) but very significantly lower by 22.35% compared to the beginning of last year (19.510 cents/lb).
In January, raw sugar lost 10.83% from 15.150 cents/lb to 13.510 cents/lb.
Same observation for white sugar in London, which starts January with a slightly higher price of 1.49% compared to the beginning of December but which assumes a drop of 24.70% compared to January 2017 ( 394.700$/t vs 524.200$/t).
White sugar decreased by 9.40% over the month from $398.600/t to $357.600/t.
Sugar, in fact, suffers from the production forecasts of India and Thailand which are estimated for 2017/2018 at +9Mt between them.
In conclusion, I think that the main catalyst for the evolution of sugar prices will be to observe sugar production in Brazil (first world producer).
It will be necessary to observe the break point between the price of sugar and the price of ethanol.
Brazil is the 2nd largest ethanol producer in the world after the United States and today it pays more for Brazil to switch to ethanol than to sugar.
I am convinced that ethanol consumption in Brazil will increase considerably in the coming months due to a number of signals.
The new Brazilian countryside should see a much smaller allocation of cane to sugar than to ethanol, driven by an oil that has gained 40% since July. It has even already experienced a decrease in sugar cane crushing in the south-central region over the first fifteen days of January.
In addition, ethanol consumption should be driven by a number of countries that intend to pursue anti-pollution policies. This is the case with giants such as China (the world’s largest automotive market), which has already planned to “support the use of fuel ethanol throughout the country by 2020”, according to the document issued by the economic planning agency, in conjunction with the Energy Administration.