The July contract expired at 12.3 cents/lb with a record delivery against the tape. The No. 11 currently sits around the 12 cents mark (October).
There have been several developments in recent weeks which have been pulling in different directions: frosts in Brazil, rising and then falling oil prices, a firmer Real, Petrobras cutting gasoline prices, rising and then falling ethanol parity in Brazil, a growing net short position, the Indian Government financed buffer stock increasing and so on.
Another interesting development is the agreement reached between India and Indonesia to lower the tariff on Indian exports of raws to Indonesia to 5%. This is the same level of preference which already applies to both Thai and Australia raw sugar origins into the Indonesia refining sector and could result in changing trade dynamics and competition in that market with potentially Thailand having to find other markets for some raws.
The overall outcome of all the above is a sluggish sugar market with prices remaining stubbornly in the 12 -12.5 cents/lb range.
Developments in the production and consumption trends have caused some analysts to reduce their global surplus in 2018/19 (to 1.3 million tonnes) and increase the projected deficit in 2019/20 (to around 4 million tonnes). Lower projected Indian output is part of the reason for the latter, but the warm weather in July/August in Europe will also have a bearing on the beet sugar crop there.
A weak premium has characterised the market. It is currently around US$ 50/t with a No. 5 price of US$ 321/t (October). There was a near record delivery against the August No. 5 contract.
The threat of large scale Indian exports and weak Chinese demand is keeping a lid on the market, at least in the short term. The question remains as to how much the re-export refiners will be required to re-open in response to a predicted tighter whites trading situation later in the year.