VAIL, COLO. —World raw sugar prices will continue to influence domestic sugar prices “as long as the status quo” in the market exists, Jeffrey Dobrydney, senior vice president, head of futures and options, JSG Commodities, told attendees of the 37th International Sweetener Symposium held Aug. 1 in Vail.
“The No. 11 will continue to influence the No. 16 price as long as high-tier imports are a component of US supply,” Mr. Dobrydney said. “Next year prices are already indicating so.”
No. 11 refers to the ICE Futures US New York world raw sugar future, while the No. 16 refers to the ICE Futures US New York domestic raw sugar future.
Mr. Dobrydney said the “status quo” include restriction of Mexican sugar exports to the United States under the suspension agreements, beet sugar production not meeting expectations, nearby supply chain constraints exacerbating price levels, reliance on end-of-year raw sugar import quota increases and elevated domestic sugar demand.
Major influences on world raw sugar prices include large money flows in part related to inflation, speculative fund positions, crude oil prices and the value of Brazil’s currency relative to the US dollar, Mr. Dobrydney said. He noted that commodity futures prices are up 19% since the first of the year but soft commodities (coffee, cocoa, sugar) were down 4.5% and sugar specifically was down 7.5%. Speculative funds in world raw sugar futures have shifted from a large net long (expect prices will move high) earlier in the year to the largest net short (expect prices to decline) since 2020. Brazil is expected to increase sugar production (while reducing cane-based ethanol production) and India is set to export a record-high amount of sugar in 2021-22.
High US sugar prices and tight supplies have made high-tier sugar imports profitable amid growing global sugar supplies and lower global raw sugar futures prices, Mr. Dobrydney indicated.
High-tier sugar imports are those imported at levels above low-duty tariff-rate quota supplies. High-tier imports in 2021-22 were estimated in July by the US Department of Agriculture at a record 278,000 tons. Mr. Dobrydney said the “math” for 2023 based on the May 2023 No. 11 future at 17¢ a lb plus the high-tier duty of 15.35¢ and estimated freight at 3.50¢ equaled a landed price of 35.85¢ a lb. He expects the difference between the world raw sugar price and the domestic raw sugar price to remain around 18¢ to 19¢ a lb in 2023, which would continue to encourage high-tier imports.