Becoming a Smarter Trader: The Market Impact of the Structure in the Sugar, Coffee, and OJ Markets Judith Ganes March 12 th, 2014
Increasing Reliance on a Few Suppliers for Global Needs Efficiency gains in major producers helping to keep small producing countries out of export markets Government provided financing and subsidies exacerbating the trend Geographical concentration increasing the risk from weather and disease While not exclusive to coffee, OJ, and sugar markets, these softs are experiencing potential supply disruptions due to global market structure
Cents per Pound Brazilian Weather Launching Arabica Prices Upward 220 200 Arabica Robusta 180 160 140 120 100 80 60 1/2/2013 3/1/2013 4/29/2013 6/25/2013 8/21/2013 10/17/2013 12/13/2013 2/12/2014 Source: Futuresource
Share of World Arabica Output Recent Brazilian On-Years Responsible for Nearly 50% of Global Arabica Output 55% 50% 45% 40% 35% 30% 25% 20% 15% 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: USDA
Share of World Robusta Output Brazil Also Supplies an Increasingly Meaningful Portion of Global Robustas 35% 30% 25% 20% 15% 10% 5% 0% 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: USDA
Share of Brazilian Arabica Output Brazilian Arabica Production Dominated by Minas Gerais State 75% 70% 65% 60% 55% 50% 02/03 04/05 06/07 08/09 10/11 12/13 14/15 Source: USDA
Share of Brazilian Robusta Output Similar Internal Brazilian Concentration Seen for Robustas in Espirito Santo 80% 75% 70% 65% 60% 55% 50% 02/03 04/05 06/07 08/09 10/11 12/13 14/15 Source: USDA
Precipitation Well Below Expected Levels in Main Brazilian Growing Regions Minas Gerais Espirito Santo Source: NOAA
Million Bags Share of World Robusta Output Vietnam Emerged as Dominant Global Robusta Supplier 30 50% 45% 25 40% 20 Production Vietnam Share of World Output 35% 30% 15 25% 20% 10 15% 5 10% 5% 0 0% 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: USDA
Cents per Pound Solids FCOJ Range Trading as Weather and Disease Worries Checked by Ample U.S. Imports and Muted Demand 160 155 150 145 140 135 130 125 120 115 110 Jan-13 Mar-13 May-13 Jul-13 Aug-13 Oct-13 Dec-13 Feb-14 Source: Futuresource
Million Boxes Citrus Greening Weighed Heavily on October Florida Orange Estimates 300 250 200 150 100 50 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: USDA
Million Boxes Boxes per Tree Sao Paolo Crop Used for FCOJ Lowest Since 91/92 on Disease Impacted Yields 450 400 350 Fresh Oranges Oranges Processed into FCOJ Yield 3.5 3 2.5 300 2 250 1.5 200 1 150 0.5 100 89/90 93/94 97/98 01/02 05/06 09/10 13/14 0 Source: USDA
Million Gallons 42-degree Brix Florida Stocks Have Remained Level Heading Into Spring 150 130 110 09/10 10/11 11/12 12/13 13/14 90 70 50 30 1 5 9 13 17 21 25 29 33 37 41 45 49 Week Number of Oct-Sep Season Source: FDOC
Million SSE Equiv. Gallons Strong U.S. Imports, Aided by Record Mexican Shipments, Have Helped to Keep Stocks From Depleting 700 600 500 Other Mexico Brazil 400 300 200 100 0 1985 1989 1993 1997 2001 2005 2009 2013 Source: FDOC
Cents per Pound Dry Brazilian Weather and Ethanol Production Estimates Behind Recent Sugar Rally 21 20 19 18 17 16 15 14 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Source: Futuresource
Million Tons Four Consecutive Years of Surplus in the Global Sugar Market 195 175 155 Output Demand 135 115 95 75 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14
Share of World Production Exported More Countries Become Self Sufficient Is Reducing Share of Global Sugar Production Exported 37% 35% 33% 31% 29% 27% 25% 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: ISO, F.O. Licht
Million Tons Russian Domestic Production Has Reduced Import Needs by Nearly 3 Million Tons Over the Past decade 6 5 Net Imports 4 3 2 1 0 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: ISO, F.O. Licht
Brazil Share of Global Prod. / Exp. Brazil Dominant in Sugar Export Market Despite Only Producing 22% of World Sugar 60% 50% 40% Production Exports 30% 20% 10% 0% 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: ISO, F.O. Licht
Share of South Central Brazilian Cane BRL/L High Ethanol, Lower Gas Prices, Reduced Share of Sugarcane Used for Ethanol Brazilian consumer gas prices held level during 2012/2013 62% 60% 58% 56% Ethanol Share of Cane Average Gas Price 2.50 2.45 2.40 2.35 With gas prices back on the rise, E27 could be a possibility 54% 52% 2.30 2.25 2.20 8% more anhydrous ethanol would be required. Roughly equivalent to 1.5m tons of raw sugar. 50% 48% 46% 44% 08/09 09/10 10/11 11/12 12/13 13/14 2.15 2.10 2.05 2.00 Source: ANP, UNICA
Brazil Ethanol / Gasoline Price Ratio Brazilian Consumer Hydrous Ethanol Prices Remain Off Recent Highs for Flex Fuel Drivers 90% 80% 70% 60% 50% 40% 30% Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Source: ANP, UNICA
Million Tons Indian Sugar Production Prone to Sharp Downturns 35 30 25 20 15 10 5 0 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: ISO, F.O. Licht
Million Tons And Swings Between Being a Net Exporter / Importer 6 4 Net Exports 2 0-2 -4-6 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Source: ISO, F.O. Licht
Million Tons Record Indian Stocks Have Resulted in Export Subsidies To Reduce Oversupply 16 As of February 2014, mills given 3,333 Rupees ($54) per ton exported Subsidy provides 11% premium over end February domestic prices Expected to result in 4 million tons exported 14 12 10 8 6 4 2 Year Ending Stocks 0 81/82 89/90 97/98 05/06 13/14 Source; WSJ, India Department of Consumer Affairs
Million Tons Thai Share of Global Exports After Brazil, Thailand Proving to Be Reliable Second Largest Sugar Exporter 12 16% 10 Production Export Share 14% 8 12% 6 10% 4 8% 2 6% 0 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 4% Source: ISO, F.O. Licht
Million Tons Australia, Guatemala Only Other Countries to Export At Least 1M Tons per Year for the Past Five Years 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Australia Guatemala Combined Share 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 16% 14% 12% 10% 8% 6% 4% 2% 0% Source: ISO, F.O. Licht
Million Tons Stocks to Use Ratio China Has Mopped Up Much of Recent Supply for Stock Building 5 54% 4.5 Imports Stocks / Use 49% 4 44% 3.5 39% 3 2.5 2 1.5 1 0.5 34% 29% 24% 19% 14% 9% 0 81/82 85/86 89/90 93/94 97/98 01/02 05/06 09/10 13/14 4% Source: ISO, F.O. Licht
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