Summary
The Brazilian election has caused a sharp unwind across the broader Ags complex, with sugar and cotton both coming off hard as the broader macro Ag trade starts to disappear. Sugar has fallen from above 21 c/lb towards 19 c/lb, while cotton has moved closer towards our 77 c/lb fair-value estimate.
The interesting part is that the fundamental stories have not really changed. Brazil’s sugar crop issues remain, coffee cert stocks are still historically low into FND, and cocoa is moving into the period where Harmattan and El Nino risks become more important.
The key question for us now is whether this is just an election unwind, or whether we start to see more fund liquidation and risk reduction into year-end.
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