REPORTS

• Brazil’s Record Sugar Hedging at Risk as Trade Finance Dries Up - Bloomberg -- Brazilian sugar mills that have been taking advantage of a currency plunge to hedge record amounts of their supply may have a harder time as bank financing to commodity traders dries up. Banks including ABN Amro NV, BNP Paribas SA and Societe Generale SA scaled back or pulled out of commodity trade financing. That means large milling operations may need to pay more for their credit lines or provide guarantees, while traders lending to smaller factories that can’t borrow directly from banks may not have access to the same amount of cash. Millers in the world’s largest producer have taken the unprecedented step of locking in prices two years ahead as a weaker real made sales of sugar priced in U.S. dollars more attractive. At the same time, the coronavirus pandemic kept cars off the road, slashing demand for competing product ethanol. Industry giant BP Bunge Bioenergia estimates demand for the biofuel will drop 10% this year.

Market moves are currently led by India. Trade flow estimates will be refined along the way by demand updates and particularly, by Indian export policy announcements. Nearly three months ago, market consensus was expecting an Indian export policy announcement in August or early September, for an unchanged policy of 5-6 mil tones of exports. A small minority of insiders then started anticipating a significant delay in policy decision. 

If Indian export policy is delayed and the subsidy is lower than expected and/or attached to lower subsidized tonnage, sugar prices will likely advance. If an Indian export announcement materializes with unchanged subsidies and tonnages, sugar prices will likely decline. 
If prices break beneath the 13.77 base before India formalizes their export policy, volume will likely expand on technical selling to commercial buying, and prices will probably recover quickly. The more likely scenario is for prices to remain stable pending policy updates.