Zheng sugar is difficult to change

  • Jan, 10th 2019

Since the 2018/2019 season, although Brazil's sugar has dropped sharply, it is difficult to change the global sugar surplus pattern. In the domestic market, in late August 2018, as the price of raw sugar hit a new low in the past decade, domestic import profits increased sharply. However, while the import volume in the new crop season increased significantly, domestic sugar consumption and demand were weak.

Brazil's production cuts are difficult to meet the international sugar market surplus

USDA's global 2019 sugar production and sales estimates show that global production is 188 million tons, total consumption is 178 million tons, oversupply of 9.91 million tons, The year-on-year decrease was 42.42%. On the whole, global sugar supply is sufficient, but the excess is drastically reduced, and the international sugar market is gradually improving.

The latest UNICA biweekly press report shows that in the first half of December 2018 (biweekly), the central and southern Brazil pressed 12.794 million tons of sugar cane, an increase of 21.66% over the same period of last year; the production of raw sugar was 419,000 tons. The year-on-year decline was 18.13%; the biweekly sugar ratio was 28.35%, down 11.83 percentage points year-on-year. As of December 16, 2018, Brazil's central and southern 2018/2019 crushing season crushed sugar cane 557 million tons, down 4.06% year-on-year; cumulative production of raw sugar 26.18 million tons, down 26.69%; cumulative sugar ratio of 35.56% , a year-on-year decline of 11.44 percentage points.

According to data from the Brazilian Ministry of Trade, in December 2018, Brazil exported a total of 1,169,600 tons of sugar, a decrease of about 14.95% year-on-year. Among them, the export volume of raw sugar decreased by 4.35% year-on-year to 1.459 million tons; the export volume of refined sugar decreased by about 57.75% year-on-year to 159,800 tons. In the 2018/2019 season, Brazil's cumulative export of sugar was 16.672 million tons, a year-on-year decrease of 27.71%.

The number of sugar imports is expected to increase

From the perspective of import tariffs, from May 22, 2018 to May 21, 2019, the tariff rate for additional safeguards is 40%; 2019 From May 22nd to May 21st, 2020, the tariff rate for additional safeguards is 35%. Together with an additional 50% normal tariff, the tariff on additional imported sugar will be reduced to 85% after May 22, 2019, with an additional tariff reduction.The bonus may appear.

The annual import quota for sugar is 1.945 million tons. The amount of quotas issued in the last two years is basically around 1.2 million tons, and the quota is not used up. Assume that the raw sugar price is between 11-15 cents/lb. The import cost of the inside and outside of the quota is measured, and the import profit is small. To some extent, the demand for the purchase of the processing plant will be restrained, and the import volume will decrease.

In November 2018, China imported 340,000 tons of sugar, an increase of 180,000 tons year-on-year, an increase of 112.5%, which was flat. The cumulative import of 2018/2019 was 680,000 tons, up 106.1% year-on-year; the cumulative import of sugar in the 2017/2018 season was 2.43 million tons, an increase of 5.7% over the 2016/2017 crop season.

It is estimated that imports will be 1.2 million to 1.3 million tons in the first half of 2019, a decrease of 80,000 to 180,000 tons. After the tax rate is lowered on May 22, 2019, the cost will decrease and the import volume will increase. In 2019, it is expected to import 3.2 million to 3.5 million tons. The 2018/2019 season is expected to import 2.8 million to 3 million tons, an increase of 370,000 to 570,000 tons year-on-year, which will effectively suppress the formation of Zheng sugar plate.

The activity of white sugar options decreased

On January 2, the trading volume of white sugar options was 24,760, with a turnover of 25.12 million yuan, a decrease of 65.19% and 66.64% respectively compared with the previous trading day. Among them, the trading volume of put options fell by a large margin, reaching 67.82%. On January 2, the number of options for white sugar options was 200440, a decrease of 0.49% from the previous trading day. Among them, there are 123,526 call options and 76,914 put options. From the weekly data, the average daily position on December 27, 2018 was 4.7 percentage points higher than the week of January 2, 2019. Among them, the position of call options increased significantly.

On January 2nd, the ratio of open interest and subscription ratio of white sugar option day was 0.62, which was about 0.03 lower than that of December 27, 2018. On the same day, the volume of quotes and subscriptions was 0.97, a decrease of 0.30 from December 27, 2018. The activity of put options decreased, and the activity of call options increased, indicating that the market was weak in the short term. The daily position and the subscription ratio have not changed much, and the basic position is maintained at 0.64.near.

In summary, Brazil maintains a low sugar ratio, and the global sugar surplus pattern is difficult to change; domestic sugar imports in the new crop season have increased significantly, and the import tariffs will be further highlighted by the downward adjustment of tariffs in the second half of the year. In addition, the trading activity of white sugar options has dropped significantly. From a technical point of view, both internal and external sugar prices have broken through important support levels, and the Zheng sugar average line has been short-selling. (Author: Qianhai Futures)