Limited promotion of Zheng Tang by Linchu in Guangxi

On February 1, the Guangxi government launched the first phase of temporary storage of 500,000 tons of sugar, with a temporary storage price of 6,000 yuan per ton, which is much higher than the current market price. Affected by this, Zheng Tang operated strongly on the first trading day after the Spring Festival. However, considering the small reserves and the current concentration of sucrose on the market, it is expected that the promotion of Zheng Sugar by Linchu in Guangxi will be limited.

The subsequent stage supply pressure is high, but the sugar production in Guangxi is not as good as expected. At present, sucrose production is at its peak. As of February 11, there are still 13 sugar factories in Yunnan Province that have not yet been pressed. Sugar factories in Guangxi, Hainan and Guangdong have all been pressed. The following stage supply pressure still exists.

By the end of January, the sugar production rate in Guangxi was 11.10%, down 0.29% year on year. From November 15, 2018 to January 31, 2019, the average temperature difference between day and night in Liuzhou is 5.50 degrees Celsius, while that in Chongzuo is 6.52 degrees Celsius, which is close to the temperature difference level in 2015/2016 (the lowest sugar yield in recent years is 2015/2016). It is estimated that the sugar yield in 2018/2019 will be less than 12%. Against the background of low sugar output, the sugar output of Guangxi in this year is less than 6.1 million tons previously expected, and may even be less than 6 million tons.

The development of Linchuan in Guangxi can solve the fund problem of sugar enterprises, but the promotion of Zheng Tang is limited. In order to solve the problem of insufficient liquidity of sugar-making enterprises, the Guangxi government decided to carry out temporary storage of sugar. The first period of temporary storage of 500,000 tons of sugar was from February 1 to June 30, 2019. The whole region unified the basic interest rate of one-year loans issued by the People's Bank of China at the price of 6,000 yuan/ton, five-month storage time and 4.35% full discount of 54,375,000 yuan. Compared with the last two temporary stores (2014/2015 and 2015/2016), this temporary reserve has less sugar. According to historical data, temporary stores have a certain boost to sugar prices in the short term, but the boost is limited.

Focus on the pressure level of 5250 above Zheng Tang's May contract. Previous bad weather makes sugar yield in Guangxi low, and sugar production in Guangxi is expected to be lower than expected. In January, Guangxi's production and marketing declined, and the production and marketing rate increased year on year. We pay attention to the production and marketing data published in other regions. Since February 1, the Guangxi government has launched temporary reserve to boost market sentiment, but it is expected that Zheng Tang's boost will be limited in scope and time. Under the background of all the sugar factories in Guangxi put into operation, considering that the consumption is off-season after the Spring Festival, the following phased supply pressure still exists, and the profit of additional imports has increased recently. We need to pay attention to the impact of the change of profits on the import volume in the later period. Zheng Sugar is expected to have limited space above, investors cautiously chase up, focusing on the 1905 contract above the pressure level of 5250 yuan/ton, there are many single can meet high earnings.

Author: Ni Xiaowei; Source: Futures Daily;