MORNING SUGAR REPORT

Wednesday January 12, 2022

World sugar futures have rallied further this morning with soft commodities up by more than 2.0% and Crude Oil approaching $83.00. March #11 is last 23 higher at 18.33 as of 10:15 AM EST, trading from 17.85 to 18.14. May is last 19 higher at 17.78, trading from 18.15 to 18.47. More than 41,000 lots have traded between March and May to this point. On spread, the March/May has traded from 26 to 31 over and last at 28 points premium. The May/July has traded from 16 to 22 over and last at 20 points premium.

SUGAR #11 OPEN INTEREST:  H2: 336,635 -847  K2: 157,110 +3,466  N2: 129,522 +308 TOTAL: 883,009 SUGAR #11 OPTION WATCH

ATM Vols. g 18.25 straddle 93-43 vol 20.33 -.50% h 18.25 straddle 103-106 vol 23.30 unch k 18.00 straddle 168-172 vol 23.01 +.10% n 17.75 straddle 207-212 vol 22.79 +.15% trades of note: 250 g 18.50/18 fence vs 18.26 trade 2 443 h 19.00/17.50 strangles trade 48 300 n 16.00 puts trade 28 LONDON #5 In London, March is last $10.20 higher at $500.00, trading from $490.70 up to $504.90 to this point. On spread, the March/May is last $3.90 higher at $10.70 premium. The March/March white premium is last $95.50, up $6.00 on the day.

MACRO BYTE Oil prices that rallied 50% in 2021 will power further ahead this year, analysts predict, saying a lack of production capacity and limited investment in the sector could lift crude above $100 a barrel. Brent crude futures traded above $84 on Wednesday, hitting two-month highs. [O/R] "Assuming China doesn't suffer a sharp slowdown, that Omicron actually becomes Omigone, and with OPEC+’s ability to raise production clearly limited, I see no reason why Brent crude cannot move towards $100 in Q1, possibly sooner," said Jeffrey Halley, senior market analyst at OANDA. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are gradually relaxing the output cuts implemented when demand collapsed in 2020. However, many smaller producers can't raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks. "We don’t want to see $100 a barrel. The world is not ready for that," Omani Oil Minister Mohammed Al Rumhi was quoted as saying by Bloomberg on Tuesday.

GLOBAL FUNDAMENTALS

Cash-wise: Yesterday, Brazil contested India's appeal to Brazil's victory in the World Trade Organization (WTO) sugar dispute, a case that documents the harmful consequences of the United States' blockade of the entity's Appellate Body. India made an "appeal in the void", as there is no judge to deal with the case. They stopped the Brazilian victory and will be able to continue giving subsidies considered illegal by the global entity. The main point in the dispute that Brazil, Australia and Guatemala have opened against India is a minimum price policy for mills to pay sugar producers. The price is high and encourages excess production, which in turn can flood the global market and bring down international prices for the commodity. Brazilian exporters have claimed losses from the policy adopted by the Indians, who have increased their share in the global sugar trade thanks to subsidies. This is a situation that will likely evolve over the next several years from sources we have spoken to.

Brazil CS mills are likely to prioritize ethanol production in 2022/23 given that fuel prices will remain high, which should ensure high ethanol prices, according to Rabobank and UNICA. Producers can earn more by generating CBios from producing ethanol, UNICA added. Average ex-mill prices of hydrous and anhydrous in Sao Paulo were at a 23-year high in the 2021/22 season so far, according to Cepea/Esalq. Also, according to UNICA – in the second half December, there was zero sugar production and 157,000 liters of Ethanol.

Chinese sugar imports will remain low and sharply below last year's levels, despite the recent weakness in raw sugar futures, as the sweetener's prices in China fall and ocean freight stays expensive, sugar consultancy CovrigAnalytics said yesterday. "The drop in Chinese domestic prices is not surprising as domestic production is picking up and on a seasonal basis shall reach a peak by the end of January," CovrigAnalytics said. "Moreover, China has already imported significant sugar volumes in 2020-21 (close to 6.7M MT – 83.5% raws) and much higher than the existing structural annual deficit of about 4.8-5M MT," it said in a report.

GLOBAL CURRENCY UPDATE  USD: 95.224 -0.45%  BRL: 5.5541 +0.34%  INR: 73.917 +0.43%  MXN: 20.359 +0.11%

Best Regards,

Jeff Dobrydney Senior Vice President Head of Futures & Options JSG Commodities This email address is being protected from spambots. You need JavaScript enabled to view it. 203.853.3000 www.jsgcom.com

This report has been compiled for general informational purposes only. While every effort has been made to ensure accuracy, Jenkins Sugar Group, Inc. assumes no responsibility for errors and omissions.