Mumbai (Commodities Control) – Global sugar prices tanked over 4.5% for the week ended June 26th owing to cool off in premiums of white/refined sugar, primarily. Anticipation of higher output and weak demand dragged the sweetener prices southwards.
Meanwhile the spread analysis of London Sugar and U.S. Sugar #11, from a chart perspective (shown below), indicates that their spot market premium has typically ranged between 0.00x to 1.50x (50.00% premium) for the last 2 decades.
However recently after hitting the highest threshold of 1.55x, the spread rate has turned lower with a current reading close to 1.36x.
Based on historical trends, there’s a good downside potential for the spread to contract.
This means London Sugar will likely underperform US Sugar #11 (on a relative basis). Thus it is advised to Sell London Sugar & Buy US Sugar #11.