Latest USDA WASDE 10/12/11 – misc. adjustments Beet sugar production estimates now stands at 4.575 million ST with downside risk In order to achieve that type of production (based on June acreage numbers) growers will have to leave 5% in fields, average 24 tonnes per acre and 16.5% sucrose content making this year an absolute dismal standout Ending S/U ratio for 2011/12 drops to 7.7% United management/Union workforce remain in lockout, without a contract and settlement to labor issue Harvest underway with United utilizing management employees and temporary hired workforce to run refineries World market has been volatile, trading in a 25-30 cent range for raws (nearby) Both Domino and United have recently announced price increases to 62 cents for bulk basis, fob whites for balance of 2011 and early 2012
WASDE - 499 - 16 U.S. Sugar Supply and Use 1/ 2009/10
2010/11 Est.
2011/12 Proj. Sep
F i l l e r
F i l l e r
F i l l e r
Beginning Stocks Production 2/ Beet Sugar Cane Sugar Florida Hawaii Louisiana Texas Imports TRQ 3/ Other Program 4/ Other 5/ Mexico Total Supply
Mixed Bag Beg. Stocks reduced TRQ increased Mexican imports dropped Food Use Increased Tighter ending S/U
What does future hold? • • •
Likely downgrade to beet crop Mexican import adjustment TRQ increase after April 1
Mexico WASDE Numbers Mexico Sugar Supply and Use and High Fructose Corn Syrup Imports 1/ Stocks Production
Domestic 2/ 1,000Imports Metric Tons, Raw Value
Exports
Stocks
Sugar 2010/11 Est. 2010/11 Est.
Sep Oct
973 973
5495 5495
392 392
4600 4600
1482 1540
778 720
2011/12 Proj. 2011/12 Proj.
Sep Oct
778 720
5650 5650
270 270
4632 4632
1113 1055
953 953
There is a growing feeling that USDA estimates of Mexican production of sugar for 2011/12 are too high and need to be adjusted lower.
Trade flows: Mexican Sugar to USA/USA Corn Syrup to Mexico
GMO Round Up Ready Sugar Beet Court Case Update • • • •
Jurisdiction in case appears to have transferred from Northern California District Court to Washington D.C. Court where GMOs will likely be better received Although Environmental Assessment has been issued, the EIS still needs to be completed and reviewed Judge White cited completion of the EA as rationale for his deferring in the case to Washington D.C. court Although uncertainty and concern over the GMO issue has died down in sugar, we suspect further court challenges may come forward in future
United Sugar has locked out its Unionized Workers • Locked out Aug 1 • 96% Union rejected offer – Signing bonus – 13% pay increase over next 5 years – Force Union to make medical payments • United plans to run harvest and plants with temporary workers
• Spring 2011: wet and cold led to late start
• Fall 2011: concern will be weather in October for harvest as crop matures, final yield and sucrose content
US Domestic White Refined Sugar Prices – bulk (fob)
World sugar: Summer rally took prices from 21 cents up to 30. We failed, traded down to 25 cents, then rallied back to 30 on lower projected Brazil crop. Expectations of surplus in 2012 should see prices normalize in latter half of 2012. Support and area of consolidation in lower 20s
Summary • • • • • • • •
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Most producers appear to be adopting a strategy of pricing sugar on par with a tier-2 delivered number Overall supply and demand have been in balance on surface, but not without sufficient TRQ imports and shipments from Mexico in particular USDA is running an extremely tight ending S/U balance sheet – performing without a net Cold, rainy spring has led to a late beet crop that could negatively impact yield and final crop production figures Recent price announcements are at 62 cents Growers have announced their intention to move forward with GMO Round Up Ready plantings and feel their case is strong against any potential case in court Growers/management at United remain in impasse and lockout Discussions have started for next year’s Farm Bill – with current budget deficits, agriculture programs are likely at greatest risk in years
Production Changes over past 6 crop years Two crop years of surplus, followed by two years of deficit. Most analysts are now expecting a balanced scenario for 2010/11. For 2012, most analysts are predicting a return of surplus assuming India production is solid and we don’t lose too much from C-S Brazil * Date Figures from ISO/Kingsman/Blommer estimates
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World Sugar: trading channels and trends to watch
16
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Summary • World – The world market has been reacting to recent downward revisions to crushed cane in Brazil – Most analysts (Datagro, UNICA, Czarnikow) have dropped their Brazilian production by 20-25 million tonnes of cane (about 3 million tonnes of sugar) – This is the first time in many years that production forecast for Brazil in dropping from pervious year – Thailand’s cane crop has surprised most in the market and led to upward revision on their sugar production and exports – Despite all revisions, most numbers still point toward balanced 2010/11 and projected surplus of some 3-4 million tonnes of sugar in 2011/12 – The pending surplus will most likely materialize in second half of 2012 – We felt that there was solid support and good value in the #11 at a price of 21-22 cents, however now we feel that the market is overdone and is overpriced at 30 cents – Speculators have consistently been on wrong side of market
