White sugar: the supply in the second half of the year is still pessimistic, and we are vigilant against macro factor risks

essentials

Brazil's crop growth concerns are still the main tone of the market rise, coupled with the rebound of commodities led by crude oil to drive sugar prices higher, sugar prices or will challenge the previous high; although the domestic sugar is in a high inventory state, but the advent of the peak consumption season makes the marginal sugar rate is gradually improving, followed by the rise in foreign sugar prices also raise import costs, Zheng sugar or will be stronger.

Core factors: supply and demand, internal and external disk role.

Risk Expectation: Weather

1. Fundamental analysis

1． Production increased year-on-year

In the 2020/21 sugar production period as of July 19, the cumulative sugar production in the country in the current crushing season was 10.6666 million tons, an increase of 251,500 tons year-on-year, an increase of 2.41%. Among them, the production of sugarcane sugar was 9.134 million tons, an increase of 111,700 tons year-on-year, and the sugar production at the end of the season increased slightly; the sugar production was 1.5326 million tons, an increase of 139,800 tons year-on-year. The cumulative sales of sugar was 6.8321 million tons, a year-on-year decrease of 264,000 tons, and the cumulative sugar sales rate was 64.05%, a year-on-year decrease of 4.08 percentage points. Among them, the sales of sugarcane sugar is 6.0664 million tons, with a sugar sales rate of 60.91%; the sales of sugar beet sugar is 1.2682 million tons, with a sugar sales rate of 82.75%.

2． The internal and external price differences are gradually decreasing, and the profit margins are declining

Since the current round of rising in New Zealand Sugar, the internal and external price difference has gradually decreased, coupled with the increase of Zheng Sugar being slightly smaller than that of New Zealand Sugar, import profits have shown negative values, boosting domestic sugar prices. At present, the brazilian raw sugar import profit (Than Zheng sugar) calculated by 50% additional tax is -417.52 yuan / ton, and the Thai white sugar with additional import profit (Than Zheng sugar) is about -591.89 yuan / ton.

According to the latest data released by the customs, China imported 420,000 tons of sugar in June 2021, an increase of 100,000 tons year-on-year, an increase of 2.4%. In the 2020/21 crushing season, China's cumulative imports of sugar were 4.53 million tons, an increase of 2.3 million tons year-on-year, and the import volume so far in this crushing season has hit the highest record of sugar imports in recent years, and the market expects imports to return to a high level in the second half of the year.

3． Brazil expects a possible pullback in production

According to the latest data from the Brazilian Sugar Association UNICA, the amount of sugarcane crushed and sugar produced in the second half of June 2021 was the same as that of the same period last year, first, because frost prompted sugar mills to speed up the crushing process, and second, because dry weather was conducive to harvesting. The bi-weekly crushing volume during the statistical period totaled 45.3409 million tons, and the sugar production was 2.912 million tons. Brazil has produced a cumulative sugar of 12.256 million tons this season, and the future production prospects are full of uncertainty. Brazil's sugar production is expected to pull back by 10-20% this season, and the prospects for sugarcane harvesting are questionable as the drought at the start of the season affects crop growth.

Falling oil prices have reduced the incentive for Brazilian plants to produce ethanol, as competing gasoline prices have also tended to fall, which has led them to increase sugar production. Traders also said fears of a cold snap in Brazil had waned as only frost had been reported in brazil's extreme southern region.

At the end of July, some sugarcane fields in Brazil's state of São Paulo were hit by bitter cold weather, but analysts said it would take time to judge the extent of the damage.

Brazil, the top sugar producer, has already suffered sugarcane production this year by drought, and severe cold weather could exacerbate production damage. While frost has hit some sugarcane-producing regions in Brazil, traders say the affected areas have already been harvested and repeated frosts in the same area will not cause more damage. Still, Brazil, the number one sugar producer, has seen a reduction in sugarcane production this year, as drought and frost over the past month have further affected production. Overall, the decline in brazilian production should be enough to offset concerns about the rapid spread of delta virus.

4． Under the influence of typhoons, precipitation in Yunnan is high, precipitation in Guangxi is low, and Brazil is still drought

In the past 10 days, except for the temperature in the northwest, Tibet and northeast China, which is higher than usual, the temperature in the rest of the country has tended to be normal. Temperatures in Yunnan and Guangxi are flat above average. In terms of precipitation, due to the impact of fireworks typhoons, the precipitation in the country shows a more extreme situation.

Precipitation is high in North China and East China, while in Yunnan, where sugar is produced, precipitation is high, while precipitation in Guangxi is low.

In early July, India's overall precipitation was abundant, monsoon rains arrived on time to improve the crop growth environment, most areas including the production area of precipitation is better than in previous years; Brazil, affected by La Niña, Brazil has been low in the past year, and the recent major producing areas of Brazil are still seriously arid, and the drought still has no trend of change.

Second, technical analysis: white sugar shock runs in the channel

The overall shock of white sugar is upward, and it is still running within the upward channel, maintaining a relatively stable rhythm.

Third, the future market outlook

Overall, the fundamentals of New Zealand sugar are still strong, the Brazilian squeeze situation is the main logic of its strong, although macro factors still affect its rush higher, but the crude oil in mid-July showed its resilience after the big fall and returned to the position before the big fall, coupled with the Brazilian production area is still facing frost, although the impact is limited, but this makes the market can hype the weather grip, then New Sugar has a good reason to rush higher again, New Sugar broke through 18 cents, or will challenge the previous high; for Zheng Sugar, Zheng Sugar is currently following New Zealand Sugar gradually climbing higher, However, the strength is far less than that of New Zealand sugar, domestic inventory pressure is larger, followed by imports in June also indicates that imports in the second half of the year will be increased, the market is still pessimistic about the domestic sugar supply in the second half of the year. But the new sugar rush will give Zheng sugar enough boost, if the new sugar breaks, Zheng sugar will have some performance, it is recommended that the current point can start to build more positions at a low price, in the second half of the year to seize each new sugar rush to give Zheng sugar a small market, but need to be vigilant about the risk of macro factors in the United States.

This article is sourced from Confident Futures