1205 Kingsman Monthly Sugar.pdf

1st May 2012 Premium Sugar Update The futures price fell sharply in April ? With good crops being confirmed in the Northern Hemisphere, attention switched from problems in CS Brazil to the fast approaching world surplus. ? Funds liquidated stale longs into a lack of end destination offtake ? The collapse of the May spreads took away one of the funds’ bullish arguments 20.0 21.0 22.0 23.0 24.0 25.0 26.0 15-Jan-12 4-Feb-12 24-Feb-12 15-Mar-12 4-Apr-12 24-Apr-12 cts/lb May New York expired weak The forward curve is a rather curious shape 21 21 21 22 22 22 22 22 23 23 23 23 N12 V12 H13 K13 N13 V13 H14 K14 N14 V14 H15 K15 cts/lb NY#11 Forward Curve ? Even though surpluses are now forecast through 2013 the market is still suggesting that prices need to be above 23 c/lb to encourage production for 2014 ? This may be because the market is pricing in an increase in the Brazilian gasoline price and a rise in the ethanol floor. ? In the absence of an increase in the gasoline price – and given good weather – we still feel prices are too high NY May futures expired with a whimper ? 682k mt of Brazils were delivered, a mix of old crop and new crop. ? Thai premiums rose as the world price fell, taking them out of the delivery game. ? Central Americans found better homes in the NAFTA region ? Indians were excluded by negative export margins and government procrastination The May weakness brought in fund selling ? Some funds apparently stayed long of sugar because the spot month was at a premium and they could cash in a roll premium ? This was always going to change with the July becoming the spot month, but the collapse in the spread probably attracted / focused the attention of the longs ? The market is now a mature bear with carrying charges through 2013 0 20 40 60 80 100 120 140 7-Dec-11 6-Jan-12 5-Feb-12 6-Mar-12 5-Apr-12 pts NY#11 Sugar May/July Spread The whites premium widened as world prices fe