Sugar market rebounded to limited space

The fact that the euro zone does not give up its promise means that the euro zone will not disintegrate. It also means that Europe will continue to help Greece. In the short term, the commodity market showed a decline and even a steady rebound, which is conducive to a stable rebound in the price of white sugar.

Five factors dominated the price of sugar in September. In terms of the sugar market, the reason why prices fell sharply in September was because they also suffered five negative effects:

First, the import volume in August increased significantly to 423,800 tons. In July, it was only 250,000 tons. In January-August 2011, it imported 1.2 million tons, and the cumulative net import volume in the 10/11 crop season reached a record high. 15.3 million tons.

The second is weak sales. The data showed that except for the cumulative sales volume in the vegetable production area in August increased year-on-year, the other production areas were insufficient. This is not in line with the era of downstream gold development. It can be said that high sugar prices have exerted some negative effects.

Third, the average price of reserve sugar dropped. From August to September, the reserve was released three times, from 7730 yuan/ton to 7021 yuan/ton. In the 2010/11 crop season, a total of 1.87 million tons of reserve sugar was put into use, which exceeded the release of 1.7 million tons in the 09/10 crop season. Since the beginning of December 2009, the country has invested 3.57 million tons of reserve sugar.

Fourth, overseas sugar prices have fallen. The fall in the price of raw sugar directly led to an estimated drop in imported sugar, and the spread between domestic sugar prices and imported sugar prices expanded again. This situation is very conducive to the expansion of imported sugar.

The fifth is the impact of increased production forecast. The new crop season is expected to return to about 12.5 million tons. The China Sugar Association is more likely to increase production, and some experts estimate that there is a potential of 13 million tons. The sugar market is shrouded in an increase in production.

The rebound or space is limited, but we must also see that the increase in imports, the drop in average reserve prices, the impact of falling raw sugar prices and the peak season are biased towards the short-to-medium-term period. In mid-October, these negative positions have gradually dissipated.

In the 2009/10 and 2010/11 press seasons, a total of 2.979 million tons were imported, most of which were converted from stockpiles of sugar reserves. If the ratio is 70%, it is 2,085,300 tons of imported sugar which is a reserve sugar. Prior to the release of reserves in December 2009, reserves of sugar stocks were approximately 1.8 to 2 million tons. A total of 3.57 million tons of reserve sugar was put into the 2009/10 and 10/11 press seasons. This means that there may be only about 500,000 tons of reserve sugar stocks.

The peak demand season will gradually start in late October because the arrival of the Spring Festival ahead of schedule, while the industrial inventory is relatively inadequate, and the southern open squeeze time may continue to be postponed. From November to December, the sugar market will still be in a phased supply situation.

With the fall in the price of raw sugar, the difference in the net position of CFTC's raw sugar positions has significantly contracted, from the previous 30,000 to 10,000. It is expected that the net position difference will continue to contract and the raw sugar's downward momentum will also decline.

If the macroeconomic level dissipates, if the macroeconomic level remains stable in late-to-late October, the white sugar futures may have a proven bottom and expansion bottom, and will continue to rebound from late October to early November and maintain high prices.

However, it should be noted that increasing production of dark clouds will increase the pressure on sugar prices. In addition, the domestic macroeconomic outlook has been decelerated because of the poor global economic performance and the persistence of austerity measures, unless there is a strong incentive to disperse the dark clouds. Therefore, we must be cautious about this round of rally. Compared to late June, we should reduce the size of more than one single position.