Sugar prices at the major global exchanges continue to exhibit volatility in H2 2020. A seven-week rally resulted in respective futures prices at New York and London InterContinental Exchanges (ICE) rising by 25% and 17% by mid-June. The benchmarks then fell by 4% and 7% respectively in the four-week period to 15th July (to US$ 257/tonne and US$ 344/tonne), based on firm supply expectations, contrasted against weak demand. However, the tide changed again in the second half of July, supported by a waning Thai supply outlook, and the New York ICE price rose to USD 260/tonne, while the London benchmark ended the month at USD 360/tonne.
The recent upturn is likely to be short-lived, as underlying fundamentals suggest that the global market will be in surplus over the next two years. In late-2019, the US Department for Agriculture (USDA) projected a 6 million tonnes sugar deficit, which should foster a firmer pricing environment. While weather-disrupted supply in south Asia presents some upside price risk, market expectations of a record predicted Brazilian sugarcane harvest should more-than offset any shortfalls elsewhere. Additionally, Brazilian mills are expected to increase the ratio of sugar produced from sugarcane at the expense of ethanol production during the next year, adding further supply, during a period of demand and logistical uncertainty. Thus, high global inventories present the key downward price risk.