@sdelsad/commodity-desk-daily 1.0.44 → 1.0.45
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<title>Soft Commodity Trading — Ep 14: Sugar: Two Contracts, the Switch and the Refiner</title>
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<div style="display:none;max-height:0;overflow:hidden;mso-hide:all;">Sugar is quoted twice, one refining step apart, and the gap between the two screens is what the market pays for refining. Then Brazil's mills, where supply is a daily decision between food and fuel, and ethanol parity is the price at which that decision flips.</div>
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<table role="presentation" width="600" cellpadding="0" cellspacing="0" border="0" align="center" style="width:100%;max-width:600px;background:#faf7f1;border:1px solid #e3ddd2;">
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<tr><td style="padding:30px 28px 24px;background:#faf7f1;"><p style="margin:0 0 6px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Soft Commodity Trading</p><p style="margin:0 0 14px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.14em;text-transform:uppercase;color:#8b8375;">Episode 14 · Monday 31 August 2026 · 13 min 11</p><h1 style="margin:0 0 12px;font-family:Georgia,'Times New Roman',Times,serif;font-size:29px;line-height:1.2;font-weight:normal;color:#16110c;">Sugar: Two Contracts, the Switch and the Refiner</h1><p style="margin:0 0 22px;font-family:Georgia,'Times New Roman',Times,serif;font-size:17px;line-height:1.5;color:#4a4238;">Sugar is quoted twice, one refining step apart, and the gap between the two screens is what the market pays for refining. Then Brazil's mills, where supply is a daily decision between food and fuel, and ethanol parity is the price at which that decision flips.</p><table role="presentation" cellpadding="0" cellspacing="0" border="0"><tr><td bgcolor="#1d4032" style="border-radius:6px;"><a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14.mp3" style="display:inline-block;padding:14px 28px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:15px;font-weight:bold;color:#faf7f1;text-decoration:none;border-radius:6px;">▶ Listen — 13 min</a></td></tr></table></td></tr>
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<tr><td style="padding:0 28px 22px;background:#faf7f1;"><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:13px;line-height:1.6;color:#4a4238;"><a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14.html" style="color:#1d4032;font-weight:bold;">Read this episode online →</a><span style="color:#8b8375;"> · charts, the quiz and the running glossary</span></p></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td style="padding:24px 28px 4px;background:#faf7f1;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Market pulse</p><p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Sugar gave back three and a half percent on Friday after a month in which it rose twenty-one, and the grains went the other way — Chicago wheat closed at a three-year high.</strong></p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Market</th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Contract</th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Price</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Change</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Raw sugar No. 11 (ICE)</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Oct 26</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">17.56 c/lb</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><span style="color:#8a2f2f;font-weight:bold;">−0.63c / −3.5%</span></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">White sugar No. 5 (ICE London)</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Oct 26</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">$520.30/t</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><span style="color:#8a2f2f;font-weight:bold;">−$8.50 / −1.6%</span></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Chicago wheat</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Sep 26</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">767.00 c/bu</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><span style="color:#215c44;font-weight:bold;">+24¼c / +3.3%</span></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Soybeans (CBOT)</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Sep 26</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">1276.25 c/bu</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><span style="color:#215c44;font-weight:bold;">+19¾c / +1.6%</span></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Soybean meal</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Sep 26</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">$338.20/t</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><span style="color:#215c44;font-weight:bold;">+$8.00 / +2.4%</span></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Corn (CBOT)</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Sep 26</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">512.00 c/bu</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><span style="color:#215c44;font-weight:bold;">+1¾c / +0.3%</span></td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Friday's sugar break reads as long liquidation into a weekend rather than a change of story. The move that matters is the one behind it: raws printed a fourteen-month high on 18 August and are still around twenty-one percent higher on the month. Three supply lines moved the same way at once. Brazil's Center-South made 3.903 million tonnes of sugar in June, down 26.3% year on year. Thailand's 2026/27 crop is forecast at 9.5 million tonnes, down 15.6%. EU and UK output is put at 14.98 million tonnes, the lowest in eleven years. The analyst community has flipped 2026/27 from surplus to deficit — the ISO now has −262,000 t, Green Pool −3.2 Mt, StoneX −1.7 Mt.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">At 17.56 cents the screen sits about two cents above the roughly 15.7 c/lb FOB cost of production for Brazilian raws. That is a market paying a real incentive, not a market at cost.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The grain complex ignored all of it. Wheat led on Black Sea export risk, beans followed the meal, and corn barely moved as a fast US harvest capped it.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="margin:6px 0 22px;"><tr><td align="center" style="border:1px solid #e3ddd2;background:#faf7f1;padding:10px;"><img src="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14_chart1.png" width="522" alt="Grains bid, sugar sold — On the same session the two complexes traded opposite stories: wheat priced an export threat, sugar priced a long book being trimmed before a weekend. — CBOT and ICE settlements, Friday 28 August 2026" title="Grains bid, sugar sold — On the same session the two complexes traded opposite stories: wheat priced an export threat, sugar priced a long book being trimmed before a weekend. — CBOT and ICE settlements, Friday 28 August 2026" style="display:block;width:100%;max-width:522px;height:auto;border:0;outline:none;text-decoration:none;"></td></tr></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>The policy read: India turns a tariff off.</strong> India is the world's largest sugar consumer, and this month it opened a duty-free import window of one million tonnes running to 31 October against a standing 100% duty. The mechanism, not the headline, is the trade. A cut domestic crop, a monsoon running 13% below normal through 26 August, and retail sugar moving from 48 rupees a kilo in July to about 55 in August give a government little choice: food inflation gets the tariff switched off. The instant it is, the largest consumer stops being an occasional exporter and becomes a buyer, which moves the world balance sheet in both directions from one administrative decision. The caution is that a permission is not a purchase — one forecaster expects no more than 500,000 t to actually clear by the deadline.</p><ul style="margin:0 0 16px;padding-left:22px;"><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Sugar is quoted twice, one refining step apart: raws in cents per pound in New York, whites in dollars per tonne in London. The bridge is 22.05, and getting it wrong is a factor-of-twenty-two error.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The gap between the two screens is the white premium, and it is the market's price for the act of refining.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Center-South Brazil is the only origin at scale that can decide, daily, whether its crop becomes food or fuel. That makes its supply a decision rather than a harvest.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">ATR is the unit that makes the decision computable, because it is the raw material for both products and the basis on which growers are paid.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Ethanol parity is the sugar price at which a mill is indifferent. Below it, mills make fuel; above it, they make sugar.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">When sugar trades far above parity, the switch has already been used. A further rally pulls no additional tonnes out of Brazil and can only ration demand.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Sugar has two demand curves, food and fuel, and the fuel curve is a floor rather than a source of demand growth.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The floor moves with things that are not sugar: the blending mandate, crude, and the Brazilian real.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">A refiner is not long sugar. He is long the spread between two contracts and short his own cost stack.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">His break-even white premium rises with the raw price, because the refining loss is a percentage of what he buys and not a fee.</li></ul>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Term</th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">What it means</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>No. 11</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The ICE raw cane sugar futures contract, 112,000 lb quoted in US cents per pound, FOB at origin, and the world price of raw sugar</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>No. 5</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The ICE London white sugar futures contract, 50 tonnes quoted in US dollars per tonne, delivered, and the world price of refined sugar</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>long ton</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">2,240 lb, the imperial weight unit the sugar No. 11 contract is still sized in at 50 long tons a lot</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>raws</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Raw cane sugar, the crystalline product a cane mill exports before refining, traded at 96 degrees polarisation</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>VHP</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Very high polarisation raw sugar, around 99 degrees, the grade Brazil exports and which trades at a premium to the No. 11 screen</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>polarisation (pol)</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The sucrose purity of a sugar measured by the rotation of polarised light, expressed in degrees, and the basis on which raw sugar is priced and settled</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>ICUMSA</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The colour scale for refined sugar, lower being whiter, with the No. 5 contract requiring 45 ICUMSA or better</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>white premium</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The price of the London white contract less the New York raw contract converted to the same unit, which is what the market pays for refining</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>ATR</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Açúcar Total Recuperável, total recoverable sugar, the kilos of sugar recoverable from a tonne of cane and the unit in which Brazilian growers are paid and mills compare products</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>sugar mix</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The share of a mill's recoverable sugars turned into sugar rather than ethanol, bounded above by the plant's crystallisation capacity</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>hydrous ethanol</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Roughly 95 percent ethanol sold directly at the pump for flex-fuel cars in Brazil, taking 1.6913 kg of ATR per litre</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>anhydrous ethanol</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Near-water-free ethanol blended into petrol under a mandate, taking 1.7651 kg of ATR per litre</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>ethanol parity</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The sugar price at which a mill earns the same per unit of ATR from sugar as from ethanol, and the level at which its production decision flips</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Center-South</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The Brazilian sugarcane region running from São Paulo through Minas Gerais and Goiás, about 90 percent of the national crop and the world's swing supplier</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>destination refinery</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">A standalone refinery at the consuming end that buys raws on the water and sells whites locally, earning the white premium less its costs rather than a crop margin</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>melt loss</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">The sugar lost between raws in and whites out, roughly six percent, which makes a refiner's break-even premium a function of the raw price</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>toll refining</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Refining someone else's raws for a fee per tonne, which converts the white premium from a trading position into a fixed margin</td></tr></tbody></table></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td style="padding:24px 28px 4px;background:#f4efe4;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Conversion drill 2 of 12</p><h3 style="margin:0 0 12px;font-family:Georgia,'Times New Roman',Times,serif;font-size:19px;line-height:1.3;font-weight:normal;color:#16110c;">Bushels ↔ tonnes, corn</h3><p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Rule:</strong> 1 tonne of corn ≈ 39.4 bushels (a bushel of corn is 56 lb)</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Fast method:</strong> tonnes → bushels: ×40, then shave 1.5%. Bushels → tonnes: ÷40, then add 1.5%.</p>
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<ul style="margin:0 0 16px;padding-left:22px;"><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">10,000 t → 400,000 − 6,000 = <strong>394,000 bu</strong></li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">60,000 t Panamax → 2,400,000 − 36,000 ≈ <strong>2.36 million bu</strong></li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">250,000 bu → 6,250 + 94 ≈ <strong>6,344 t</strong></li></ul></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td style="padding:24px 28px 4px;background:#faf7f1;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Quiz</p><p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Q1.</strong> A Center-South mill will crush 3.6 million tonnes of cane this season at 138 kg of ATR per tonne of cane. Its board is deciding the sugar mix. Raw sugar is at 16.20 c/lb and the São Paulo hydrous ethanol indicator is at $0.4100 a litre. Use the industry factors: 1.0495 kg of ATR per kg of sugar, 1.6913 kg of ATR per litre of hydrous. Compute the ethanol parity price in cents per pound, then the extra revenue the mill earns by moving five percentage points of its mix from ethanol to sugar — and state the one reason that figure overstates what actually lands in the accounts.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Q2.</strong> October whites settle at $520.30 a tonne. A destination refiner needs 1.06 tonnes of raws for each tonne of white he sells, and his refining cost is $70 a tonne of white. If raw sugar rallied to 20.00 c/lb, what white premium would he need to break even?</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Q3.</strong> <em>(Ep 13)</em> An exporter sells 15 lots of arabica price-to-be-fixed against December, buyer's call. December was 302.00 when the contract was signed and is 342.00 today, with the buyer still unfixed. Compute the exporter's mark-to-market credit exposure to that buyer.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Q4.</strong> <em>(Ep 11)</em> In the middle of harvest week, a terminal elevator with no funding problem posts a corn bid fifteen cents under the board when every neighbouring bid is five under. Say what that bid is doing.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Conversion drill.</strong> A Handysize parcel of 28,500 t of corn is being offered. Convert it to bushels using the mental method.</p></td></tr>
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<tr><td align="center" style="padding:20px 28px;background:#f4efe4;border-top:1px solid #e3ddd2;border-bottom:1px solid #e3ddd2;"><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:12px;font-weight:bold;letter-spacing:.12em;text-transform:uppercase;color:#8a2f2f;">Solutions below — answer first</p></td></tr>
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<tr><td height="240" style="height:240px;line-height:240px;font-size:1px;background:#faf7f1;"> </td></tr>
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<tr><td height="240" style="height:240px;line-height:240px;font-size:1px;background:#faf7f1;"> </td></tr>
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<tr><td style="padding:10px 28px 4px;background:#faf7f1;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Solutions</p><p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A1.</strong> The mill is not choosing a price. It is choosing which product to make out of a fixed pool of recoverable sugars, so every comparison has to be made per tonne of ATR.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><em>Step one — the pool.</em> 3.6 million tonnes of cane at 138 kg of ATR per tonne gives 496,800 tonnes of ATR for the season.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><em>Step two — what one tonne of ATR is worth each way.</em></p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;"></th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Factor</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Output per t of ATR</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Price</th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Revenue</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Sugar</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">1.0495 kg ATR per kg</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">952.8 kg</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">$357.15/t</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>$340.30</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Hydrous ethanol</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">1.6913 kg ATR per litre</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">591.3 L</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">$0.4100/L</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>$242.42</strong></td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The sugar price comes from the screen: 16.20 c/lb × 22.0462 = $357.15 a tonne. Sugar beats ethanol by <strong>$97.88 per tonne of ATR</strong>, about 40 percent.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><em>Step three — ethanol parity.</em> Run the ethanol number backwards to find the sugar price that would make the mill indifferent. Ethanol earns $0.4100 ÷ 1.6913 = $0.2424 per kg of ATR. One kg of ATR yields 0.9528 kg of sugar. So parity is $0.2424 ÷ 0.9528 = $0.2544 per kg, which is <strong>$254.42 a tonne, or 11.54 c/lb</strong>. The screen at 16.20 is 4.66 cents above parity.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><em>Step four — the five points.</em> Five percentage points of 496,800 t of ATR is 24,840 t of ATR. At $97.88 a tonne of ATR, that is <strong>about $2.43 million</strong> of extra revenue for the season.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><em>The trap.</em> The two prices are not measured at the same place. The ethanol indicator is a mill-gate price. The No. 11 screen is FOB the port, so the sugar route still has to pay road freight from the interior, port elevation and terminal costs before it reaches the mill gate — several tens of dollars a tonne of sugar, which eats a visible slice of the $97.88. The gap survives that deduction comfortably at these prices, which is the real answer, but a board paper that quotes $2.43 million without netting logistics is quoting a gross number as if it were a margin.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Two second-order points worth having. The mix is bounded by crystallisation capacity, so "move five points" is an engineering question before it is an economic one — a mill already at its ceiling cannot take the trade at any price. And the moment the mill sells more sugar it takes on price risk it did not have, because ethanol is sold domestically in reais while sugar is sold in dollars.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A2.</strong> One step, and the step is the loss factor.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">20.00 c/lb × 22.0462 = $440.92 a tonne of raws. He buys 1.06 tonnes for every tonne he sells, so his raw cost is $467.38. Add $70 of refining and he needs $537.38 for the white. The white premium he needs is therefore $537.38 − $440.92 = <strong>$96.46 a tonne</strong>.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The quick route is the same arithmetic in one line: the premium has to cover the six percent he loses plus the fee, so 0.06 × $440.92 + $70 = $96.46.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">What the question is testing is that the break-even premium is not a constant. At Friday's 17.56 c/lb the same refiner breaks even at $93.23. At 12 c/lb he breaks even at $85.87. Every cent the raw market rallies raises his break-even, because the melt loss is a percentage of what he buys and the refining fee is not. A refiner who watches the premium in dollars alone believes a bull market is making him money, when part of the widening is simply keeping him whole.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A3.</strong> 15 lots of arabica is 15 × 37,500 lb = 562,500 lb. The market has moved 342.00 − 302.00 = 40.00 cents in the buyer's favour since the contract was signed. At 40 cents on 562,500 lb, the buyer is sitting on an unrealised gain of <strong>$225,000</strong>, and that is exactly the exporter's mark-to-market credit exposure.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The reason it is credit and not market risk is that the exporter is fully hedged on price. He sold futures against the sale, and whenever the buyer fixes, the futures leg and the physical leg offset. What he is exposed to is the buyer choosing not to fix at all — walking away from a contract that is now $225,000 in the money to the exporter's disadvantage, or failing altogether. The buyer has posted nothing against that gain. The exposure grows with every cent the market rallies, and no market move can reduce it to zero.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A4.</strong> The bid is not a price. It is a refusal.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">An elevator that is ten cents worse than its neighbours in harvest week, with money available, is not making a statement about the value of corn. It is managing a queue. Its binding constraint is space, not capital: once the bins are full, the next truck through the gate has nowhere to go, and taking that corn means either turning it away later or piling it on the ground at a cost. So the bid drops until the trucks go elsewhere.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Two consequences follow. First, the posted bid stops carrying information about the basis and starts carrying information about capacity, so reading it as a market signal is a mistake. Second, the elevator that still has space in that week owns the bottleneck and can set replacement value for everyone around it. That is the whole reason merchants rent ships and own elevators.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Drill answer.</strong> 28,500 t of corn.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Mental method: multiply by 40 and shave 1.5 percent. 28,500 × 40 = 1,140,000. One and a half percent of that is 17,100. So 1,140,000 − 17,100 = <strong>1,122,900 bushels</strong>.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Exact: 28,500 t × 39.368 = 1,121,988 bu, so the mental route is 0.08 percent high. At 5,000 bushels to a Chicago lot, that parcel is about <strong>224 lots</strong> — worth checking, because a Handysize corn cargo hedged as 228 lots is four lots of naked length nobody put on deliberately.</p></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td style="padding:24px 28px 4px;background:#faf7f1;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">The episode, in writing</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Sugar is quoted twice, and the two quotes are not in the same language.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>No. 11</strong> is the ICE raw sugar contract in New York. It prices raw cane sugar free on board at origin and it is the world price of the raw commodity. It is quoted in US cents per pound. A lot is 112,000 lb, which is 50 long tons, and the tick is one hundredth of a cent — a point, in the softs convention — worth $11.20.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>No. 5</strong> is the ICE white sugar contract in London. It prices refined sugar, delivered, in US dollars per tonne, with 50 tonnes to a lot.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">One commodity, one refining step apart, quoted in two different units. The bridge is the tonne itself: 2,204.6 lb, so cents per pound multiplied by 22.0462 gives dollars per tonne. Friday's 17.56 c/lb is $387.13 a tonne. London settled at $520.30. The difference, <strong>$133.17 a tonne</strong>, is the white premium, and it is what the market pays for the act of refining.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Center-South Brazil is the swing supplier of the world sugar market, and its mills have something no other origin has at scale: a choice.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">A cane mill crushes cane, extracts the recoverable sugars, and then sends those sugars down one of two pipes. Crystal sugar for export, or ethanol for the pump. The choice is made continuously through the season, and the plant is built to do both.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The unit that makes it computable is <strong>ATR</strong> — <em>Açúcar Total Recuperável</em>, total recoverable sugar. ATR measures the kilos of sugar that could in principle be recovered from a tonne of cane. It is neither sugar nor ethanol; it is the feedstock for both, and it is the basis on which Brazilian growers are paid, which is why the entire industry speaks in it.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The conversion factors are industry standard:</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Product</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">ATR required</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">1 kg of sugar</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1.0495 kg</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">1 litre of hydrous ethanol</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1.6913 kg</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">1 litre of anhydrous ethanol</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1.7651 kg</td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Take one tonne of ATR and run it both ways at Friday's prices.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Route</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Output</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Price</th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Revenue</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Sugar</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">952.8 kg</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">$387.13/t</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>$368.87</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Hydrous ethanol</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">591.3 L</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">$0.4476/L</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>$264.65</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Anhydrous ethanol</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">566.5 L</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">$0.5043/L</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>$285.71</strong></td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Sugar wins by $104.22 a tonne of ATR against hydrous — about 40 percent.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="margin:6px 0 22px;"><tr><td align="center" style="border:1px solid #e3ddd2;background:#faf7f1;padding:10px;"><img src="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14_chart2.png" width="522" alt="One tonne of ATR, three destinations — At Friday's prices the sugar route earns forty percent more per unit of recoverable sugar than hydrous ethanol. That gap, not the sugar price itself, is what sets Brazil's export supply. — Computed from ICE No. 11 October settlement 17.56 c/lb and CEPEA/ESALQ São Paulo ethanol indicators, 28 August 2026, using CONSECANA conversion factors" title="One tonne of ATR, three destinations — At Friday's prices the sugar route earns forty percent more per unit of recoverable sugar than hydrous ethanol. That gap, not the sugar price itself, is what sets Brazil's export supply. — Computed from ICE No. 11 October settlement 17.56 c/lb and CEPEA/ESALQ São Paulo ethanol indicators, 28 August 2026, using CONSECANA conversion factors" style="display:block;width:100%;max-width:522px;height:auto;border:0;outline:none;text-decoration:none;"></td></tr></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Run the ethanol number backwards and you get the figure a desk actually quotes: <strong>ethanol parity</strong>, the sugar price at which the mill is indifferent between the two pipes.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Hydrous earns $0.4476 ÷ 1.6913 = $0.2647 per kg of ATR. One kg of ATR makes 0.9528 kg of sugar. So parity is $0.2647 ÷ 0.9528 = $0.2778 per kg, or <strong>$277.75 a tonne — 12.60 c/lb</strong>. On anhydrous it is 13.60.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The screen was 17.56. Sugar is nearly five cents above parity, which in tonnes is $109 of headroom.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">That headroom is not free money. Everything between the mill gate and the ship's rail has to fit inside it: truck freight from the interior, port elevation, terminal costs. But it fits comfortably, and that is the point. It is why Center-South mills have been running their sugar mix at the top of their engineering limit — above half the crop — for two seasons.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Here is how the question gets asked on a desk:</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="margin:0 0 20px;"><tr><td style="border-left:3px solid #a8813c;padding:4px 0 4px 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.55;font-style:italic;color:#4a4238;"><strong>TRADER:</strong> Where's parity?<br><strong>ANALYST:</strong> Twelve sixty on hydrous. Thirteen sixty on anhydrous.<br><strong>TRADER:</strong> So they're maxed.<br><strong>ANALYST:</strong> Maxed since April. There's nothing left to switch.</td></tr></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Notice what that exchange settles. Nobody asked where sugar was going. The question was whether Brazil has any switching left in it — and the answer determines what a rally can do. When sugar trades far above parity, the mills have already converted everything they can convert. The switch is spent. A rally from there pulls no additional tonnes out of Brazil; all it can do is ration demand. That is a structurally different market from one where a rally brings supply forward.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">This is what makes sugar odd. It has two demand curves.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Food demand is inelastic and grows roughly with population. Fuel demand is not about sugar at all — it is about petrol prices, blending policy and the Brazilian real.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The fuel curve does not usually add much growth. What it does is put a <strong>floor</strong> under the price. If sugar falls to parity, the mill stops making sugar. Supply does not taper politely; it switches, at a level you can compute in advance.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">And the floor moves. Brazil lifted its mandatory anhydrous blend to 32%. Crude has rallied. The São Paulo hydrous indicator was up 2.85% last week and anhydrous 2.35%. Each of those raises the floor under sugar without a single tonne of sugar changing hands — which is why a sugar analyst spends half their time on energy.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Back to the white premium: $133.17 a tonne on Friday.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">A refiner buys raws, melts them, strips out the colour and the molasses film, and sells whites. He is not long sugar. He is long the spread between two contracts and short his own cost stack.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">He also cannot make a tonne of white from a tonne of raws. Raws are 96 degrees polarisation; the No. 5 contract wants 45 ICUMSA and near-total purity. Add process losses and call it <strong>1.06 tonnes of raws for one tonne of white</strong>.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="margin:6px 0 22px;"><tr><td align="center" style="border:1px solid #e3ddd2;background:#faf7f1;padding:10px;"><img src="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14_chart3.png" width="522" alt="A refiner's margin, Friday's screens — The whole business is the white premium less the melt loss and the fee. Forty dollars a tonne is what survives — and the loss line grows every time raws rally. — Worked example, episode 14, using ICE No. 11 and No. 5 October settlements of 28 August 2026 and an assumed $70/t refining cost" title="A refiner's margin, Friday's screens — The whole business is the white premium less the melt loss and the fee. Forty dollars a tonne is what survives — and the loss line grows every time raws rally. — Worked example, episode 14, using ICE No. 11 and No. 5 October settlements of 28 August 2026 and an assumed $70/t refining cost" style="display:block;width:100%;max-width:522px;height:auto;border:0;outline:none;text-decoration:none;"></td></tr></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Now the part people get wrong.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">His break-even white premium is <strong>not a constant</strong>. The six percent he loses in the melt is a percentage of the raw price, not a fee. At Friday's raws that loss costs $23.23, so he breaks even at a premium of $93.23. If raws were at 12 c/lb the same loss would cost $15.87 and break-even would be $85.87.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">So when raws rally, the white premium has to widen just to leave the refiner exactly where he was. A refiner who watches the premium in dollars rather than against the raw price will believe he is earning more on the way up and discover he is not.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">That is the second reason a white premium blows out in a bull market. The first is that everybody wants refined sugar at once, and refining capacity is fixed in the short run. The second is arithmetic.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The India window and the Brazilian switch are the same story told from opposite ends.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">India turning off a 100% duty adds demand that no crop created. Brazil, already at its mix ceiling, cannot answer it with more sugar. When a market's swing supplier has spent its flexibility, incremental demand has to be rationed by price rather than met by supply — and the rationing shows up first in the white premium, because the consuming end wants refined sugar, not raws.</p></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td style="padding:24px 28px 4px;background:#faf7f1;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Glossary</p><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.6;color:#4a4238;">Every unit and expression the show has introduced lives on the episode page, and it stays up to date. <a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14.html#glossary" style="color:#1d4032;">Open the glossary →</a></p></td></tr>
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<tr><td style="padding:22px 28px 30px;background:#ece7db;border-top:1px solid #e3ddd2;"><p style="margin:0 0 6px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:12px;line-height:1.7;color:#4a4238;"><strong>Soft Commodity Trading</strong> — a daily briefing on physical commodity trading.</p><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:12px;line-height:1.7;color:#8b8375;"><a href="https://storage.googleapis.com/podcast-audio-2647223968/index.html" style="color:#4a4238;">All episodes</a> · <a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/feed.xml" style="color:#4a4238;">Subscribe by RSS</a> · <a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14.html" style="color:#4a4238;">This episode online</a></p></td></tr>
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package/email.txt
ADDED
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SOFT COMMODITY TRADING
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Episode 14 · Monday 31 August 2026 · 13 min 11
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Sugar: Two Contracts, the Switch and the Refiner
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Sugar is quoted twice, one refining step apart, and the gap between the two
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screens is what the market pays for refining. Then Brazil's mills, where
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supply is a daily decision between food and fuel, and ethanol parity is the
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price at which that decision flips.
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Listen: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14.mp3
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Read online: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14.html
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MARKET PULSE
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============
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Sugar gave back three and a half percent on Friday after a month in which it
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rose twenty-one, and the grains went the other way — Chicago wheat closed at
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a three-year high.
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Market Contract Price Change
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----------------------------------------------------------------------
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Raw sugar No. 11 (ICE) Oct 26 17.56 c/lb −0.63c / −3.5%
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23
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White sugar No. 5 (ICE London) Oct 26 $520.30/t −$8.50 / −1.6%
|
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24
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+
Chicago wheat Sep 26 767.00 c/bu +24¼c / +3.3%
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25
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+
Soybeans (CBOT) Sep 26 1276.25 c/bu +19¾c / +1.6%
|
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26
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+
Soybean meal Sep 26 $338.20/t +$8.00 / +2.4%
|
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27
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+
Corn (CBOT) Sep 26 512.00 c/bu +1¾c / +0.3%
|
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28
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+
|
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29
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+
Friday's sugar break reads as long liquidation into a weekend rather than a
|
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30
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+
change of story. The move that matters is the one behind it: raws printed a
|
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31
|
+
fourteen-month high on 18 August and are still around twenty-one percent
|
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32
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+
higher on the month. Three supply lines moved the same way at once. Brazil's
|
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33
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+
Center-South made 3.903 million tonnes of sugar in June, down 26.3% year on
|
|
34
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+
year. Thailand's 2026/27 crop is forecast at 9.5 million tonnes, down 15.6%.
|
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35
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+
EU and UK output is put at 14.98 million tonnes, the lowest in eleven years.
|
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36
|
+
The analyst community has flipped 2026/27 from surplus to deficit — the ISO
|
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37
|
+
now has −262,000 t, Green Pool −3.2 Mt, StoneX −1.7 Mt.
|
|
38
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+
|
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39
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+
At 17.56 cents the screen sits about two cents above the roughly 15.7 c/lb
|
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40
|
+
FOB cost of production for Brazilian raws. That is a market paying a real
|
|
41
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+
incentive, not a market at cost.
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42
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+
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43
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+
The grain complex ignored all of it. Wheat led on Black Sea export risk,
|
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44
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+
beans followed the meal, and corn barely moved as a fast US harvest capped
|
|
45
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+
it.
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46
|
+
|
|
47
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+
[chart] Grains bid, sugar sold — On the same session the two complexes
|
|
48
|
+
traded opposite stories: wheat priced an export threat, sugar priced
|
|
49
|
+
a long book being trimmed before a weekend. — CBOT and ICE
|
|
50
|
+
settlements, Friday 28 August 2026 —
|
|
51
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+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-
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+
desk-daily/ep14_chart1.png
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+
|
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54
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+
The policy read: India turns a tariff off. India is the world's largest
|
|
55
|
+
sugar consumer, and this month it opened a duty-free import window of one
|
|
56
|
+
million tonnes running to 31 October against a standing 100% duty. The
|
|
57
|
+
mechanism, not the headline, is the trade. A cut domestic crop, a monsoon
|
|
58
|
+
running 13% below normal through 26 August, and retail sugar moving from 48
|
|
59
|
+
rupees a kilo in July to about 55 in August give a government little choice:
|
|
60
|
+
food inflation gets the tariff switched off. The instant it is, the largest
|
|
61
|
+
consumer stops being an occasional exporter and becomes a buyer, which moves
|
|
62
|
+
the world balance sheet in both directions from one administrative decision.
|
|
63
|
+
The caution is that a permission is not a purchase — one forecaster expects
|
|
64
|
+
no more than 500,000 t to actually clear by the deadline.
|
|
65
|
+
|
|
66
|
+
* Sugar is quoted twice, one refining step apart: raws in cents per pound
|
|
67
|
+
in New York, whites in dollars per tonne in London. The bridge is 22.05,
|
|
68
|
+
and getting it wrong is a factor-of-twenty-two error.
|
|
69
|
+
|
|
70
|
+
* The gap between the two screens is the white premium, and it is the
|
|
71
|
+
market's price for the act of refining.
|
|
72
|
+
|
|
73
|
+
* Center-South Brazil is the only origin at scale that can decide, daily,
|
|
74
|
+
whether its crop becomes food or fuel. That makes its supply a decision
|
|
75
|
+
rather than a harvest.
|
|
76
|
+
|
|
77
|
+
* ATR is the unit that makes the decision computable, because it is the
|
|
78
|
+
raw material for both products and the basis on which growers are paid.
|
|
79
|
+
|
|
80
|
+
* Ethanol parity is the sugar price at which a mill is indifferent. Below
|
|
81
|
+
it, mills make fuel; above it, they make sugar.
|
|
82
|
+
|
|
83
|
+
* When sugar trades far above parity, the switch has already been used. A
|
|
84
|
+
further rally pulls no additional tonnes out of Brazil and can only
|
|
85
|
+
ration demand.
|
|
86
|
+
|
|
87
|
+
* Sugar has two demand curves, food and fuel, and the fuel curve is a
|
|
88
|
+
floor rather than a source of demand growth.
|
|
89
|
+
|
|
90
|
+
* The floor moves with things that are not sugar: the blending mandate,
|
|
91
|
+
crude, and the Brazilian real.
|
|
92
|
+
|
|
93
|
+
* A refiner is not long sugar. He is long the spread between two contracts
|
|
94
|
+
and short his own cost stack.
|
|
95
|
+
|
|
96
|
+
* His break-even white premium rises with the raw price, because the
|
|
97
|
+
refining loss is a percentage of what he buys and not a fee.
|
|
98
|
+
|
|
99
|
+
Term What it means
|
|
100
|
+
----------------------------------------------------------------------------
|
|
101
|
+
No. 11 The ICE raw cane sugar futures contract, 112,000 lb
|
|
102
|
+
quoted in US cents per pound, FOB at origin, and the
|
|
103
|
+
world price of raw sugar
|
|
104
|
+
No. 5 The ICE London white sugar futures contract, 50 tonnes
|
|
105
|
+
quoted in US dollars per tonne, delivered, and the
|
|
106
|
+
world price of refined sugar
|
|
107
|
+
long ton 2,240 lb, the imperial weight unit the sugar No. 11
|
|
108
|
+
contract is still sized in at 50 long tons a lot
|
|
109
|
+
raws Raw cane sugar, the crystalline product a cane mill
|
|
110
|
+
exports before refining, traded at 96 degrees
|
|
111
|
+
polarisation
|
|
112
|
+
VHP Very high polarisation raw sugar, around 99 degrees,
|
|
113
|
+
the grade Brazil exports and which trades at a premium
|
|
114
|
+
to the No. 11 screen
|
|
115
|
+
polarisation (pol) The sucrose purity of a sugar measured by the rotation
|
|
116
|
+
of polarised light, expressed in degrees, and the
|
|
117
|
+
basis on which raw sugar is priced and settled
|
|
118
|
+
ICUMSA The colour scale for refined sugar, lower being
|
|
119
|
+
whiter, with the No. 5 contract requiring 45 ICUMSA or
|
|
120
|
+
better
|
|
121
|
+
white premium The price of the London white contract less the New
|
|
122
|
+
York raw contract converted to the same unit, which is
|
|
123
|
+
what the market pays for refining
|
|
124
|
+
ATR Açúcar Total Recuperável, total recoverable sugar, the
|
|
125
|
+
kilos of sugar recoverable from a tonne of cane and
|
|
126
|
+
the unit in which Brazilian growers are paid and mills
|
|
127
|
+
compare products
|
|
128
|
+
sugar mix The share of a mill's recoverable sugars turned into
|
|
129
|
+
sugar rather than ethanol, bounded above by the
|
|
130
|
+
plant's crystallisation capacity
|
|
131
|
+
hydrous ethanol Roughly 95 percent ethanol sold directly at the pump
|
|
132
|
+
for flex-fuel cars in Brazil, taking 1.6913 kg of ATR
|
|
133
|
+
per litre
|
|
134
|
+
anhydrous ethanol Near-water-free ethanol blended into petrol under a
|
|
135
|
+
mandate, taking 1.7651 kg of ATR per litre
|
|
136
|
+
ethanol parity The sugar price at which a mill earns the same per
|
|
137
|
+
unit of ATR from sugar as from ethanol, and the level
|
|
138
|
+
at which its production decision flips
|
|
139
|
+
Center-South The Brazilian sugarcane region running from São Paulo
|
|
140
|
+
through Minas Gerais and Goiás, about 90 percent of
|
|
141
|
+
the national crop and the world's swing supplier
|
|
142
|
+
destination refinery A standalone refinery at the consuming end that buys
|
|
143
|
+
raws on the water and sells whites locally, earning
|
|
144
|
+
the white premium less its costs rather than a crop
|
|
145
|
+
margin
|
|
146
|
+
melt loss The sugar lost between raws in and whites out, roughly
|
|
147
|
+
six percent, which makes a refiner's break-even
|
|
148
|
+
premium a function of the raw price
|
|
149
|
+
toll refining Refining someone else's raws for a fee per tonne,
|
|
150
|
+
which converts the white premium from a trading
|
|
151
|
+
position into a fixed margin
|
|
152
|
+
|
|
153
|
+
|
|
154
|
+
CONVERSION DRILL 2 OF 12 — BUSHELS ↔ TONNES, CORN
|
|
155
|
+
=================================================
|
|
156
|
+
|
|
157
|
+
Rule: 1 tonne of corn ≈ 39.4 bushels (a bushel of corn is 56 lb)
|
|
158
|
+
|
|
159
|
+
Fast method: tonnes → bushels: ×40, then shave 1.5%. Bushels → tonnes: ÷40,
|
|
160
|
+
then add 1.5%.
|
|
161
|
+
|
|
162
|
+
* 10,000 t → 400,000 − 6,000 = 394,000 bu
|
|
163
|
+
|
|
164
|
+
* 60,000 t Panamax → 2,400,000 − 36,000 ≈ 2.36 million bu
|
|
165
|
+
|
|
166
|
+
* 250,000 bu → 6,250 + 94 ≈ 6,344 t
|
|
167
|
+
|
|
168
|
+
|
|
169
|
+
QUIZ
|
|
170
|
+
====
|
|
171
|
+
|
|
172
|
+
Q1. A Center-South mill will crush 3.6 million tonnes of cane this season at
|
|
173
|
+
138 kg of ATR per tonne of cane. Its board is deciding the sugar mix. Raw
|
|
174
|
+
sugar is at 16.20 c/lb and the São Paulo hydrous ethanol indicator is at
|
|
175
|
+
$0.4100 a litre. Use the industry factors: 1.0495 kg of ATR per kg of sugar,
|
|
176
|
+
1.6913 kg of ATR per litre of hydrous. Compute the ethanol parity price in
|
|
177
|
+
cents per pound, then the extra revenue the mill earns by moving five
|
|
178
|
+
percentage points of its mix from ethanol to sugar — and state the one
|
|
179
|
+
reason that figure overstates what actually lands in the accounts.
|
|
180
|
+
|
|
181
|
+
Q2. October whites settle at $520.30 a tonne. A destination refiner needs
|
|
182
|
+
1.06 tonnes of raws for each tonne of white he sells, and his refining cost
|
|
183
|
+
is $70 a tonne of white. If raw sugar rallied to 20.00 c/lb, what white
|
|
184
|
+
premium would he need to break even?
|
|
185
|
+
|
|
186
|
+
Q3. (Ep 13) An exporter sells 15 lots of arabica price-to-be-fixed against
|
|
187
|
+
December, buyer's call. December was 302.00 when the contract was signed and
|
|
188
|
+
is 342.00 today, with the buyer still unfixed. Compute the exporter's mark-
|
|
189
|
+
to-market credit exposure to that buyer.
|
|
190
|
+
|
|
191
|
+
Q4. (Ep 11) In the middle of harvest week, a terminal elevator with no
|
|
192
|
+
funding problem posts a corn bid fifteen cents under the board when every
|
|
193
|
+
neighbouring bid is five under. Say what that bid is doing.
|
|
194
|
+
|
|
195
|
+
Conversion drill. A Handysize parcel of 28,500 t of corn is being offered.
|
|
196
|
+
Convert it to bushels using the mental method.
|
|
197
|
+
|
|
198
|
+
|
|
199
|
+
============================================================================
|
|
200
|
+
SOLUTIONS BELOW — ANSWER FIRST
|
|
201
|
+
============================================================================
|
|
202
|
+
|
|
203
|
+
|
|
204
|
+
|
|
205
|
+
|
|
206
|
+
|
|
207
|
+
|
|
208
|
+
|
|
209
|
+
|
|
210
|
+
|
|
211
|
+
|
|
212
|
+
|
|
213
|
+
|
|
214
|
+
|
|
215
|
+
|
|
216
|
+
|
|
217
|
+
|
|
218
|
+
|
|
219
|
+
|
|
220
|
+
|
|
221
|
+
|
|
222
|
+
|
|
223
|
+
|
|
224
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+
|
|
225
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+
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226
|
+
|
|
227
|
+
|
|
228
|
+
SOLUTIONS
|
|
229
|
+
=========
|
|
230
|
+
|
|
231
|
+
A1. The mill is not choosing a price. It is choosing which product to make
|
|
232
|
+
out of a fixed pool of recoverable sugars, so every comparison has to be
|
|
233
|
+
made per tonne of ATR.
|
|
234
|
+
|
|
235
|
+
Step one — the pool. 3.6 million tonnes of cane at 138 kg of ATR per tonne
|
|
236
|
+
gives 496,800 tonnes of ATR for the season.
|
|
237
|
+
|
|
238
|
+
Step two — what one tonne of ATR is worth each way.
|
|
239
|
+
|
|
240
|
+
Factor Output per t of ATR Price Revenue
|
|
241
|
+
----------------------------------------------------------------------------
|
|
242
|
+
Sugar 1.0495 kg ATR per 952.8 kg $357.15/t $340.30
|
|
243
|
+
kg
|
|
244
|
+
Hydrous ethanol 1.6913 kg ATR per 591.3 L $0.4100/L $242.42
|
|
245
|
+
litre
|
|
246
|
+
|
|
247
|
+
The sugar price comes from the screen: 16.20 c/lb × 22.0462 = $357.15 a
|
|
248
|
+
tonne. Sugar beats ethanol by $97.88 per tonne of ATR, about 40 percent.
|
|
249
|
+
|
|
250
|
+
Step three — ethanol parity. Run the ethanol number backwards to find the
|
|
251
|
+
sugar price that would make the mill indifferent. Ethanol earns $0.4100 ÷
|
|
252
|
+
1.6913 = $0.2424 per kg of ATR. One kg of ATR yields 0.9528 kg of sugar. So
|
|
253
|
+
parity is $0.2424 ÷ 0.9528 = $0.2544 per kg, which is $254.42 a tonne, or
|
|
254
|
+
11.54 c/lb. The screen at 16.20 is 4.66 cents above parity.
|
|
255
|
+
|
|
256
|
+
Step four — the five points. Five percentage points of 496,800 t of ATR is
|
|
257
|
+
24,840 t of ATR. At $97.88 a tonne of ATR, that is about $2.43 million of
|
|
258
|
+
extra revenue for the season.
|
|
259
|
+
|
|
260
|
+
The trap. The two prices are not measured at the same place. The ethanol
|
|
261
|
+
indicator is a mill-gate price. The No. 11 screen is FOB the port, so the
|
|
262
|
+
sugar route still has to pay road freight from the interior, port elevation
|
|
263
|
+
and terminal costs before it reaches the mill gate — several tens of dollars
|
|
264
|
+
a tonne of sugar, which eats a visible slice of the $97.88. The gap survives
|
|
265
|
+
that deduction comfortably at these prices, which is the real answer, but a
|
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266
|
+
board paper that quotes $2.43 million without netting logistics is quoting a
|
|
267
|
+
gross number as if it were a margin.
|
|
268
|
+
|
|
269
|
+
Two second-order points worth having. The mix is bounded by crystallisation
|
|
270
|
+
capacity, so "move five points" is an engineering question before it is an
|
|
271
|
+
economic one — a mill already at its ceiling cannot take the trade at any
|
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272
|
+
price. And the moment the mill sells more sugar it takes on price risk it
|
|
273
|
+
did not have, because ethanol is sold domestically in reais while sugar is
|
|
274
|
+
sold in dollars.
|
|
275
|
+
|
|
276
|
+
A2. One step, and the step is the loss factor.
|
|
277
|
+
|
|
278
|
+
20.00 c/lb × 22.0462 = $440.92 a tonne of raws. He buys 1.06 tonnes for
|
|
279
|
+
every tonne he sells, so his raw cost is $467.38. Add $70 of refining and he
|
|
280
|
+
needs $537.38 for the white. The white premium he needs is therefore $537.38
|
|
281
|
+
− $440.92 = $96.46 a tonne.
|
|
282
|
+
|
|
283
|
+
The quick route is the same arithmetic in one line: the premium has to cover
|
|
284
|
+
the six percent he loses plus the fee, so 0.06 × $440.92 + $70 = $96.46.
|
|
285
|
+
|
|
286
|
+
What the question is testing is that the break-even premium is not a
|
|
287
|
+
constant. At Friday's 17.56 c/lb the same refiner breaks even at $93.23. At
|
|
288
|
+
12 c/lb he breaks even at $85.87. Every cent the raw market rallies raises
|
|
289
|
+
his break-even, because the melt loss is a percentage of what he buys and
|
|
290
|
+
the refining fee is not. A refiner who watches the premium in dollars alone
|
|
291
|
+
believes a bull market is making him money, when part of the widening is
|
|
292
|
+
simply keeping him whole.
|
|
293
|
+
|
|
294
|
+
A3. 15 lots of arabica is 15 × 37,500 lb = 562,500 lb. The market has moved
|
|
295
|
+
342.00 − 302.00 = 40.00 cents in the buyer's favour since the contract was
|
|
296
|
+
signed. At 40 cents on 562,500 lb, the buyer is sitting on an unrealised
|
|
297
|
+
gain of $225,000, and that is exactly the exporter's mark-to-market credit
|
|
298
|
+
exposure.
|
|
299
|
+
|
|
300
|
+
The reason it is credit and not market risk is that the exporter is fully
|
|
301
|
+
hedged on price. He sold futures against the sale, and whenever the buyer
|
|
302
|
+
fixes, the futures leg and the physical leg offset. What he is exposed to is
|
|
303
|
+
the buyer choosing not to fix at all — walking away from a contract that is
|
|
304
|
+
now $225,000 in the money to the exporter's disadvantage, or failing
|
|
305
|
+
altogether. The buyer has posted nothing against that gain. The exposure
|
|
306
|
+
grows with every cent the market rallies, and no market move can reduce it
|
|
307
|
+
to zero.
|
|
308
|
+
|
|
309
|
+
A4. The bid is not a price. It is a refusal.
|
|
310
|
+
|
|
311
|
+
An elevator that is ten cents worse than its neighbours in harvest week,
|
|
312
|
+
with money available, is not making a statement about the value of corn. It
|
|
313
|
+
is managing a queue. Its binding constraint is space, not capital: once the
|
|
314
|
+
bins are full, the next truck through the gate has nowhere to go, and taking
|
|
315
|
+
that corn means either turning it away later or piling it on the ground at a
|
|
316
|
+
cost. So the bid drops until the trucks go elsewhere.
|
|
317
|
+
|
|
318
|
+
Two consequences follow. First, the posted bid stops carrying information
|
|
319
|
+
about the basis and starts carrying information about capacity, so reading
|
|
320
|
+
it as a market signal is a mistake. Second, the elevator that still has
|
|
321
|
+
space in that week owns the bottleneck and can set replacement value for
|
|
322
|
+
everyone around it. That is the whole reason merchants rent ships and own
|
|
323
|
+
elevators.
|
|
324
|
+
|
|
325
|
+
Drill answer. 28,500 t of corn.
|
|
326
|
+
|
|
327
|
+
Mental method: multiply by 40 and shave 1.5 percent. 28,500 × 40 =
|
|
328
|
+
1,140,000. One and a half percent of that is 17,100. So 1,140,000 − 17,100 =
|
|
329
|
+
1,122,900 bushels.
|
|
330
|
+
|
|
331
|
+
Exact: 28,500 t × 39.368 = 1,121,988 bu, so the mental route is 0.08 percent
|
|
332
|
+
high. At 5,000 bushels to a Chicago lot, that parcel is about 224 lots —
|
|
333
|
+
worth checking, because a Handysize corn cargo hedged as 228 lots is four
|
|
334
|
+
lots of naked length nobody put on deliberately.
|
|
335
|
+
|
|
336
|
+
|
|
337
|
+
THE EPISODE, IN WRITING
|
|
338
|
+
=======================
|
|
339
|
+
|
|
340
|
+
|
|
341
|
+
|
|
342
|
+
Sugar is quoted twice, and the two quotes are not in the same language.
|
|
343
|
+
|
|
344
|
+
No. 11 is the ICE raw sugar contract in New York. It prices raw cane sugar
|
|
345
|
+
free on board at origin and it is the world price of the raw commodity. It
|
|
346
|
+
is quoted in US cents per pound. A lot is 112,000 lb, which is 50 long tons,
|
|
347
|
+
and the tick is one hundredth of a cent — a point, in the softs convention —
|
|
348
|
+
worth $11.20.
|
|
349
|
+
|
|
350
|
+
No. 5 is the ICE white sugar contract in London. It prices refined sugar,
|
|
351
|
+
delivered, in US dollars per tonne, with 50 tonnes to a lot.
|
|
352
|
+
|
|
353
|
+
One commodity, one refining step apart, quoted in two different units. The
|
|
354
|
+
bridge is the tonne itself: 2,204.6 lb, so cents per pound multiplied by
|
|
355
|
+
22.0462 gives dollars per tonne. Friday's 17.56 c/lb is $387.13 a tonne.
|
|
356
|
+
London settled at $520.30. The difference, $133.17 a tonne, is the white
|
|
357
|
+
premium, and it is what the market pays for the act of refining.
|
|
358
|
+
|
|
359
|
+
Center-South Brazil is the swing supplier of the world sugar market, and its
|
|
360
|
+
mills have something no other origin has at scale: a choice.
|
|
361
|
+
|
|
362
|
+
A cane mill crushes cane, extracts the recoverable sugars, and then sends
|
|
363
|
+
those sugars down one of two pipes. Crystal sugar for export, or ethanol for
|
|
364
|
+
the pump. The choice is made continuously through the season, and the plant
|
|
365
|
+
is built to do both.
|
|
366
|
+
|
|
367
|
+
The unit that makes it computable is ATR — Açúcar Total Recuperável, total
|
|
368
|
+
recoverable sugar. ATR measures the kilos of sugar that could in principle
|
|
369
|
+
be recovered from a tonne of cane. It is neither sugar nor ethanol; it is
|
|
370
|
+
the feedstock for both, and it is the basis on which Brazilian growers are
|
|
371
|
+
paid, which is why the entire industry speaks in it.
|
|
372
|
+
|
|
373
|
+
The conversion factors are industry standard:
|
|
374
|
+
|
|
375
|
+
Product ATR required
|
|
376
|
+
------------------------------------------
|
|
377
|
+
1 kg of sugar 1.0495 kg
|
|
378
|
+
1 litre of hydrous ethanol 1.6913 kg
|
|
379
|
+
1 litre of anhydrous ethanol 1.7651 kg
|
|
380
|
+
|
|
381
|
+
Take one tonne of ATR and run it both ways at Friday's prices.
|
|
382
|
+
|
|
383
|
+
Route Output Price Revenue
|
|
384
|
+
-----------------------------------------------
|
|
385
|
+
Sugar 952.8 kg $387.13/t $368.87
|
|
386
|
+
Hydrous ethanol 591.3 L $0.4476/L $264.65
|
|
387
|
+
Anhydrous ethanol 566.5 L $0.5043/L $285.71
|
|
388
|
+
|
|
389
|
+
Sugar wins by $104.22 a tonne of ATR against hydrous — about 40 percent.
|
|
390
|
+
|
|
391
|
+
[chart] One tonne of ATR, three destinations — At Friday's prices the sugar
|
|
392
|
+
route earns forty percent more per unit of recoverable sugar than
|
|
393
|
+
hydrous ethanol. That gap, not the sugar price itself, is what sets
|
|
394
|
+
Brazil's export supply. — Computed from ICE No. 11 October
|
|
395
|
+
settlement 17.56 c/lb and CEPEA/ESALQ São Paulo ethanol indicators,
|
|
396
|
+
28 August 2026, using CONSECANA conversion factors —
|
|
397
|
+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-
|
|
398
|
+
desk-daily/ep14_chart2.png
|
|
399
|
+
|
|
400
|
+
Run the ethanol number backwards and you get the figure a desk actually
|
|
401
|
+
quotes: ethanol parity, the sugar price at which the mill is indifferent
|
|
402
|
+
between the two pipes.
|
|
403
|
+
|
|
404
|
+
Hydrous earns $0.4476 ÷ 1.6913 = $0.2647 per kg of ATR. One kg of ATR makes
|
|
405
|
+
0.9528 kg of sugar. So parity is $0.2647 ÷ 0.9528 = $0.2778 per kg, or
|
|
406
|
+
$277.75 a tonne — 12.60 c/lb. On anhydrous it is 13.60.
|
|
407
|
+
|
|
408
|
+
The screen was 17.56. Sugar is nearly five cents above parity, which in
|
|
409
|
+
tonnes is $109 of headroom.
|
|
410
|
+
|
|
411
|
+
That headroom is not free money. Everything between the mill gate and the
|
|
412
|
+
ship's rail has to fit inside it: truck freight from the interior, port
|
|
413
|
+
elevation, terminal costs. But it fits comfortably, and that is the point.
|
|
414
|
+
It is why Center-South mills have been running their sugar mix at the top of
|
|
415
|
+
their engineering limit — above half the crop — for two seasons.
|
|
416
|
+
|
|
417
|
+
Here is how the question gets asked on a desk:
|
|
418
|
+
|
|
419
|
+
| TRADER: Where's parity?
|
|
420
|
+
|
|
421
|
+
| ANALYST: Twelve sixty on hydrous. Thirteen sixty on anhydrous.
|
|
422
|
+
|
|
423
|
+
| TRADER: So they're maxed.
|
|
424
|
+
|
|
425
|
+
| ANALYST: Maxed since April. There's nothing left to switch.
|
|
426
|
+
|
|
427
|
+
Notice what that exchange settles. Nobody asked where sugar was going. The
|
|
428
|
+
question was whether Brazil has any switching left in it — and the answer
|
|
429
|
+
determines what a rally can do. When sugar trades far above parity, the
|
|
430
|
+
mills have already converted everything they can convert. The switch is
|
|
431
|
+
spent. A rally from there pulls no additional tonnes out of Brazil; all it
|
|
432
|
+
can do is ration demand. That is a structurally different market from one
|
|
433
|
+
where a rally brings supply forward.
|
|
434
|
+
|
|
435
|
+
This is what makes sugar odd. It has two demand curves.
|
|
436
|
+
|
|
437
|
+
Food demand is inelastic and grows roughly with population. Fuel demand is
|
|
438
|
+
not about sugar at all — it is about petrol prices, blending policy and the
|
|
439
|
+
Brazilian real.
|
|
440
|
+
|
|
441
|
+
The fuel curve does not usually add much growth. What it does is put a floor
|
|
442
|
+
under the price. If sugar falls to parity, the mill stops making sugar.
|
|
443
|
+
Supply does not taper politely; it switches, at a level you can compute in
|
|
444
|
+
advance.
|
|
445
|
+
|
|
446
|
+
And the floor moves. Brazil lifted its mandatory anhydrous blend to 32%.
|
|
447
|
+
Crude has rallied. The São Paulo hydrous indicator was up 2.85% last week
|
|
448
|
+
and anhydrous 2.35%. Each of those raises the floor under sugar without a
|
|
449
|
+
single tonne of sugar changing hands — which is why a sugar analyst spends
|
|
450
|
+
half their time on energy.
|
|
451
|
+
|
|
452
|
+
Back to the white premium: $133.17 a tonne on Friday.
|
|
453
|
+
|
|
454
|
+
A refiner buys raws, melts them, strips out the colour and the molasses
|
|
455
|
+
film, and sells whites. He is not long sugar. He is long the spread between
|
|
456
|
+
two contracts and short his own cost stack.
|
|
457
|
+
|
|
458
|
+
He also cannot make a tonne of white from a tonne of raws. Raws are 96
|
|
459
|
+
degrees polarisation; the No. 5 contract wants 45 ICUMSA and near-total
|
|
460
|
+
purity. Add process losses and call it 1.06 tonnes of raws for one tonne of
|
|
461
|
+
white.
|
|
462
|
+
|
|
463
|
+
[chart] A refiner's margin, Friday's screens — The whole business is the
|
|
464
|
+
white premium less the melt loss and the fee. Forty dollars a tonne
|
|
465
|
+
is what survives — and the loss line grows every time raws rally. —
|
|
466
|
+
Worked example, episode 14, using ICE No. 11 and No. 5 October
|
|
467
|
+
settlements of 28 August 2026 and an assumed $70/t refining cost —
|
|
468
|
+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-
|
|
469
|
+
desk-daily/ep14_chart3.png
|
|
470
|
+
|
|
471
|
+
Now the part people get wrong.
|
|
472
|
+
|
|
473
|
+
His break-even white premium is not a constant. The six percent he loses in
|
|
474
|
+
the melt is a percentage of the raw price, not a fee. At Friday's raws that
|
|
475
|
+
loss costs $23.23, so he breaks even at a premium of $93.23. If raws were at
|
|
476
|
+
12 c/lb the same loss would cost $15.87 and break-even would be $85.87.
|
|
477
|
+
|
|
478
|
+
So when raws rally, the white premium has to widen just to leave the refiner
|
|
479
|
+
exactly where he was. A refiner who watches the premium in dollars rather
|
|
480
|
+
than against the raw price will believe he is earning more on the way up and
|
|
481
|
+
discover he is not.
|
|
482
|
+
|
|
483
|
+
That is the second reason a white premium blows out in a bull market. The
|
|
484
|
+
first is that everybody wants refined sugar at once, and refining capacity
|
|
485
|
+
is fixed in the short run. The second is arithmetic.
|
|
486
|
+
|
|
487
|
+
The India window and the Brazilian switch are the same story told from
|
|
488
|
+
opposite ends.
|
|
489
|
+
|
|
490
|
+
India turning off a 100% duty adds demand that no crop created. Brazil,
|
|
491
|
+
already at its mix ceiling, cannot answer it with more sugar. When a
|
|
492
|
+
market's swing supplier has spent its flexibility, incremental demand has to
|
|
493
|
+
be rationed by price rather than met by supply — and the rationing shows up
|
|
494
|
+
first in the white premium, because the consuming end wants refined sugar,
|
|
495
|
+
not raws.
|
|
496
|
+
|
|
497
|
+
|
|
498
|
+
----------------------------------------------------------------------------
|
|
499
|
+
Soft Commodity Trading — a daily briefing on physical commodity trading.
|
|
500
|
+
|
|
501
|
+
GLOSSARY
|
|
502
|
+
Every unit and expression the show has introduced lives on the episode page:
|
|
503
|
+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep14.html#glossary
|
|
504
|
+
|
|
505
|
+
All episodes: https://storage.googleapis.com/podcast-audio-2647223968/index.html
|
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506
|
+
RSS: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/feed.xml
|