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4 März 2022
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12 März 2022

Calendar spread auf Zucker

In this period when, due to the war in Ukraine, commodities seem to be going crazy (and not just commodities... there are those who expect crude oil at $200 a barrel at the end of March), I try to analyse a commodity that should have fewer repercussions from the war and sanctions on Russia, sugar.

As usual, I use the excellent SpreadCharts app which allows me a complete analysis of the spread. The spread in question is SBN22-SBK23. I start by showing you the chart with the 5- and 15-year seasonal patterns.

The seasonality is bearish and ends between mid-April and mid-May, so there is still time to trade the spread. A confirmation of the bearish seasonality comes from the Seasonality by month chart shown below.

SBN22-SBK23 Seasonality by month (

You can see that March has been bearish in 14 out of 15 years and in all of the last 5 years.

The characteristic of this spread is that it is in backwardation (above zero). If I take the Continuous histogram, I do not have any useful information, as the spread, as you can see by looking at the chart, starts its descent well before the seasonal window and therefore, the current contango/backwardation amplitude is certainly far from having extreme values (i.e., well outside the green band of the 5th-95th percentile range).

SBN22-SBK23 Continuous histogram (

However, for the reason given above, this should not be misleading. Taking the Seasonality stacked chart you can see that at this point in time, it was only in 2021 that the spread was higher than it is today (by just two cents) and that in all previous years the spread had already returned to contango (negative price).

SBN22-SBK23 Seasonality stacked (

Another confirmation comes from the term structure you can see below.

The shape is classic, but what can be seen from the chart is that in both the 5- and 15-year averages, the two deliveries (July 2022 and May 2023) are in contango. So we are looking at an anomaly which, however, in this period is hardly a surprise.

The last chart I look at is the COT, the net position of the Speculators. Net position that anticipates what I will shortly say about the fundamental analysis of sugar.

At the moment there is not much interest from hedge funds in sugar. Despite the fact that the price is again attacking the $20 level, the net position is well below the 150K-160K touched in previous months, (last Friday just below 60K).

Fundamental analysis tells me that the start of 2022 has seen a drop in global raw sugar price by more than 10 percent from a multi-year high that was achieved in November 2021 in response to increasing global supplies. The supply woes are expected to ease out with better prospects for Brazil sugar harvest in the upcoming season starting in April and a bigger crop of sugar in India.

The global market for sugar was around 193.2 million tons in 2020 and industry watchers expect it to reach around 202.1 million tons by 2026.

Taking the latest WASDE, you can indeed see that in the US ending stocks are increasing in both the January and February projections (the next report will be released tomorrow Wednesday, 9 March).

From the table above, it can be seen that the supply of sugar is increasing while demand remains unchanged. This leads to an increase in ending stocks and consequently an increase in the Stock to Use Ratio (the ratio between Ending Stocks and Use Total).

Last aspect before final conclusions. The spread is constructed with two deliveries referring to two different crops. The Crop Year for sugar runs from October to July (as far as deliveries are concerned). So SBN22 (i.e., July 2022 delivery) will concern the 2021-2022 crop while SBK23 (i.e., May 2023 delivery) will concern the 2022-2023 crop. So, any kind of news, will have a much greater impact on the first delivery (SBN22) than on the second (SBK23).

I am now drawing conclusions. The war in Ukraine is leading to a sharp and generalised increase in commodity prices, so any consideration at this time can easily be contradicted by speculation. However, sugar, like a bit of all commodity "softs," should be little affected by the conflict (at least in theory).

Sugar is certainly not bullish at the moment. You have seen from fundamental analysis that there are no issues whatsoever and, indeed, the harvest and supply of sugar in world markets is growing. You have seen this in the US with the WASDE report but it is also the case in Brazil and India (the two largest producing countries).

All my analysis, from seasonality to COT, is leaning towards a spread decline and the current price is already a good level to sell SBN22-SBK23 at. The aim is for the spread to return to contango, i.e., below zero. Needless to say, caution should be exercised at this time.

David Carli
David Carli
David ist Finanzanalyst mit über 28 Jahren Erfahrung (davon zwei Jahre als Fondsmanager) im Bereich Währungen und Rohstoffe. Er zusammenarbeiten bei einer großen europäischen Rohstoff-Investmentgesellschaft und ist Autor mehrerer erfolgreicher Bücher über Handel und Finanzmärkte.

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