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After a\u00a030-year career at the world\u2019s\u00a0largest trading companies,\u00a0including\u00a0Cargill, Bunge, Wilmar and Engelhart, Philip\u00a0has set up Rhino, a consultancy, to share his market experience and\u00a0expertise\u00a0with producers,\u00a0consumers\u00a0and hedge funds.\u00a0For my first question,\u00a0I asked him\u00a0how\u00a0the\u00a0four trading\u00a0houses\u00a0he\u00a0had\u00a0worked for\u00a0differed.\u00a0<\/strong><\/p>\n Bunge and Cargill were culturally aligned and relied heavily on communication across different parts\u00a0of the business. They consistently focused on internal analytics, believing that their market edge would come from proprietary research and trading acumen.<\/p>\n Wilmar was more of a typical Asian trading house, with\u00a0dominant leaders\u00a0centralising\u00a0much of the decision-making. Again,\u00a0we\u00a0relied\u00a0heavily\u00a0on\u00a0physicals\u00a0and fundamentals when making our trading decisions.<\/p>\n When I joined in 2021,\u00a0Engelhart\u00a0had\u00a0already\u00a0exited its physical\u00a0businesses. We\u00a0operated\u00a0as\u00a0a fund, relying\u00a0on\u00a0a\u00a0combination of fundamental and quantitative analysis. We\u00a0probably spent\u00a0half our time\u00a0on\u00a0fundamentals and analytics, and the other half\u00a0on\u00a0interpreting data and trading from a more\u00a0\u2018quantamental\u2019\u00a0perspective.<\/p>\n Cargill has exited physical sugar trading and now trades only\u00a0derivatives. Was it a good decision?<\/strong><\/p>\n When I was at Cargill through 2012, it was a dominant player in the industry, with\u00a0a very large\u00a0physical presence and assets\u2014more at destination than at origin. The model changed after 2012. It still traded\u00a0physicals\u00a0but\u00a0sold its assets, so it no\u00a0longer had\u00a0those\u00a0to trade around.\u00a0The company\u00a0became\u00a0much leaner,\u00a0with a\u00a0smaller\u00a0footprint\u00a0and\u00a0lower costs.<\/p>\n Whether that was good or bad is difficult to judge. In today\u2019s sugar market, it\u00a0is\u00a0hard\u00a0to be anything other than a\u00a0lean structure trading primarily\u00a0in futures, or\u00a0a\u00a0relatively large\u00a0structure with a presence across many physical markets and some assets.\u00a0Once Cargill decided to step away from assets, it was\u00a0probably right\u00a0for them\u00a0to step back from physical\u00a0trading as well.<\/p>\n \u00a0<\/strong>Can you trade physical sugar without assets?<\/strong><\/p>\n You can trade physicals without assets, but you then\u00a0become\u00a0more of a price taker,\u00a0making\u00a0it harder to find leverage in the market.<\/p>\n If you have assets\u2014particularly refinery assets and storage\u2014you can use them to build\u00a0programmes\u00a0in either\u00a0raws\u00a0or whites. You can adjust your pace, use storage flexibility, and trade more aggressively around deliveries and expiries.<\/p>\n Assets give you the opportunity to build leverage around\u00a0futures\u00a0expiries.\u00a0You can still trade physicals without assets, but your\u00a0position\u00a0in the delivery game is weaker.\u00a0You rely on third parties to build destination books and to\u00a0participate\u00a0in the\u00a0futures\u00a0market.<\/p>\n In my experience, assets are more valuable at destination than at origin\u00a0for a trading book.\u00a0At origin, logistics pressures often make it difficult to build flexibility and optionality\u00a0into\u00a0those assets.\u00a0Elevation can become a burden when you are obliged to run at a\u00a0set\u00a0pace each month.<\/p>\n You may have some\u00a0built-in\u00a0flexibility, but\u00a0take-or-pay commitments can require you to run elevation whether or not you have a destination for the sugar.<\/p>\n \u00a0<\/strong>Tell me about Rhino.\u00a0First, where does the name come from?<\/strong><\/p>\n It is\u00a0a play on my surname and was\u00a0my\u00a0nickname,\u00a0dating\u00a0back to\u00a0when I worked in Australia.\u00a0We have bulls, bears and, occasionally, buffaloes\u2014thanks to you. So I thought: why not add a rhino to the mix?<\/p>\n We are an information and\u00a0consulting firm. We support clients by providing a trading framework and actionable insights across the global sugar market, particularly white sugar.<\/p>\n There is a huge amount of information in the market today, but\u00a0more information does not always make hedging and pricing decisions\u00a0easier.\u00a0We\u00a0help\u00a0our clients\u00a0filter the noise, explain what the information means,\u00a0identify\u00a0the implications, and create a simplified framework for decision-making.<\/p>\n We aim to help clients understand the risk of the market moving against them, the potential opportunities available to them, and the main drivers of price risk.<\/p>\n How has the\u00a0market changed\u00a0since you started\u00a0in\u00a0sugar\u00a030 years ago?<\/strong><\/p>\n When I started as a futures trader at Cargill, volumes were relatively low, and participants were mainly commercial.\u00a0Our edge came from receiving information on key origins and destinations before other market participants, thanks to our local operations and global presence. We did not have social media or the internet to relay information as they do today.<\/p>\n Funds existed, but they were\u00a0relatively small\u00a0and predictable. They would buy or sell over two or three days; once they were done, they were\u00a0finished.\u00a0Today, the\u00a0market’s\u00a0composition\u00a0has changed entirely. Speculators are much\u00a0larger.<\/p>\n Fundamentals\u00a0remain\u00a0an important input and\u00a0continue\u00a0to shape the market\u2019s medium- to long-term direction. However,\u00a0speculative flows often dwarf commercial flows in the short term. Sugar can become correlated with crude oil\u00a0or energy one week, and with\u00a0currencies\u00a0or other\u00a0soft commodities the next. Correlations come and go with no logic or foresight. Politics\u00a0and global macro developments\u00a0can also shape short-term movements.<\/p>\n A\u00a0commodity trader\u00a0needs to understand and\u00a0anticipate\u00a0how macroeconomic\u00a0factors may influence the market. That means traders\u00a0probably hold\u00a0positions for\u00a0shorter\u00a0periods\u00a0and take fewer highly leveraged bets than\u00a0before.<\/p>\n As the market adage goes, \u201cMarkets can remain irrational longer than you can stay solvent.\u201d<\/p>\n Who are these\u00a0speculators?<\/strong><\/p>\n Let\u2019s start with the CTAs, the Commodity Trading Advisors. They are much more important than they used to be, with assets under management about 10 times what they were 20 years ago.<\/p>\n There are two\u00a0broad\u00a0types\u00a0of CTAs:\u00a0discretionary and systematic.\u00a0Discretionary CTAs\u00a0are\u00a0where people understand market fundamentals and trade\u00a0accordingly. These are closer to the traditional CTAs of old.<\/p>\n Almost all\u00a0growth\u00a0over\u00a0the past 20 years\u00a0has\u00a0come\u00a0from\u00a0systematic CTAs.\u00a0Around 85% of CTA assets under management today are systematic. These firms employ people who build backward-looking models using tools such as moving averages and breakout levels to\u00a0determine\u00a0when to buy or sell.<\/p>\n Essentially, their\u00a0models buy when markets\u00a0appear to be\u00a0strengthening\u2014for example, when shorter-term averages cross longer-term averages\u2014and sell when the\u00a0opposite occurs. As signals\u00a0strengthen, they scale into positions.<\/p>\n These funds trade across\u00a0perhaps 25\u00a0or 30 commodities simultaneously. They trade without emotion. They do not necessarily know or care about the underlying fundamentals; their models tell them whether to buy or sell, and orders may be executed automatically.<\/p>\n They can lose money in half of their markets and still be successful if their gains in the other half are larger. They tend to make good money in trending markets and get chopped around in range-bound markets. Historically, gains in trends have often outweighed losses in range-bound markets.<\/p>\n To what extent are commodity markets now\u00a0being\u00a0traded by computers?<\/strong><\/p>\n High-frequency trading firms can\u00a0account for\u00a0a significant share of daily volume\u2014well over half in some cases.<\/p>\n CTAs are harder to measure, but estimates suggest that a fully deployed CTA position in sugar may be around 50,000 to 60,000 lots. If CTAs move from an extended short position to long, or vice versa, that could mean more than 100,000 lots of potential buying or selling over several days.<\/p>\n What about index funds\u2014the traditional long-only\u00a0\u2018whales\u2019? Are they still\u00a0relevant?<\/strong><\/p>\n They are less interesting and less relevant than CTAs, simply because they tend to be large,\u00a0long\u00a0and static.<\/p>\n There is some adjustment during the year, particularly at year-end when indices rebalance across commodities. There is also activity around the roll at\u00a0futures\u00a0expiry, creating liquidity and\u00a0perhaps opportunities\u00a0for the trade to scalp. However, their influence is\u00a0probably much\u00a0lower than that of CTAs,\u00a0as they simply\u00a0go long and sit there. Their position moves up and\u00a0down somewhat, but they do not enter and exit\u00a0frequently.<\/p>\n What about\u00a0the traditional\u00a0trade houses?<\/strong><\/p>\n They\u00a0still matter and\u00a0retain\u00a0an edge because they understand physical markets and convergence games around expiry in\u00a0ways\u00a0that indices, black\u00a0boxes\u00a0and high-frequency traders do not.\u00a0However, traders are human and trade emotionally. The key for a trade house is to understand where,\u00a0when\u00a0and how to play.<\/p>\n Trade houses have\u00a0at times\u00a0been beaten up by getting large\u00a0flat-price\u00a0moves wrong when black boxes have engaged strongly in one direction. That may not be the game they should play\u00a0hardest. They need to\u00a0pick and choose\u00a0their battles.<\/p>\n What is the hardest part of being a physical sugar trader?<\/strong><\/p>\n Excluding the act of buying and selling itself, the toughest situation is taking a large position and finding that you are wrong because circumstances, crops or supply-and-demand balances have\u00a0shifted.<\/p>\n In\u00a0futures, if your position is appropriate for market liquidity, you can usually enter and exit relatively easily. In\u00a0physicals, exit liquidity can be\u00a0very difficult\u00a0to find. The biggest challenge for physical traders\u00a0is\u00a0when they\u00a0want to turn a position\u00a0because\u00a0they see values turning against them\u00a0is finding exit liquidity.<\/p>\n Can you make\u00a0money\u00a0trading physical sugar without taking\u00a0a\u00a0position?<\/strong><\/p>\n It is challenging\u00a0to\u00a0achieve a back-to-back margin on\u00a0raw sugar. You cannot easily buy sugar in Brazil and sell it to a refiner in China or the Middle East\u00a0for\u00a0a meaningful back-to-back profit.<\/p>\n In whites, pockets of opportunity\u00a0remain. Traders with strong destination relationships can create value. Some companies\u00a0excel\u00a0in containers, running\u00a0relatively small\u00a0positions while generating consistent margins.<\/p>\n On\u00a0raws, you need to build positions.\u00a0Your edge\u00a0lies in combining a\u00a0futures\u00a0view with cash.<\/p>\n Are regional players taking market share from traditional\u00a0trade\u00a0houses?<\/strong><\/p>\n On whites,\u00a0yes,\u00a0we have seen regional or\u00a0specialised\u00a0players gain market share\u00a0by building relationships and doing it well.<\/p>\n Raw sugar\u00a0still appears to be\u00a0dominated by global companies\u00a0with access to\u00a0large destination entities.<\/p>\n Are state-owned companies becoming more involved in sugar trading, as they have in grain markets?<\/strong><\/p>\n Not really. If anything, sugar has moved away from state participation and more towards private companies.<\/p>\n Sugar consumption is stagnant, while\u00a0sugarcane\u00a0ethanol faces\u00a0growing competition from\u00a0other feedstocks. How are producers\u00a0responding?<\/strong><\/p>\n It is a difficult environment;\u00a0producers are suffering. Sugar prices have consistently\u00a0been\u00a0below production costs\u00a0across\u00a0most origins.<\/p>\n Brazilian mills\u00a0enjoyed\u00a0strong\u00a0margins, returns and free cash flow two or three years ago. Today, cash flows are negative. Over the cycle, it can still be a positive-cash-flow business. The challenge is ensuring that when times are good, companies reduce debt rather than simply reinvesting all cash flow in expansion. Otherwise, they can struggle with debt when the cycle turns down.<\/p>\n Brazil used to be the main regulator: when sugar prices were low, the cane mix would shift significantly towards\u00a0ethanol. But Brazilian corn ethanol has expanded rapidly and is now\u00a0displacing\u00a0the equivalent of\u00a0perhaps 15\u201316 million\u00a0tonnes\u00a0of sugar in ethanol terms. That trend is likely to continue.<\/p>\n Is there a future for EU sugar producers?<\/strong><\/p>\n Absolutely. Europe is a huge market.<\/p>\n If Europe were\u00a0a single producer, it would\u00a0likely\u00a0produce\u00a0almost enough sugar to meet domestic demand\u2014but\u00a0not quite enough. That would force imports and allow domestic prices to trade at import parity,\u00a0perhaps 750\u2013800 euros per\u00a0tonne\u00a0at current levels.<\/p>\n The question is whether exports should be\u00a0its\u00a0focus.\u00a0Crop planning is difficult because yields are uncertain, and producers need sufficient acreage to guarantee domestic supply.\u00a0Over time, Europe may reduce production slightly and see domestic prices remain consistently higher.<\/p>\n Is the sugar market\u00a0fundamentally in\u00a0structural surplus, with occasional weather-related shortages?<\/strong><\/p>\n On a production-and-consumption basis, the answer is probably \u2018no\u2019.<\/p>\n However, the answer may be\u00a0yes\u00a0on a trade-flow basis,\u00a0as stocks can often be exported\u00a0relatively easily\u00a0once prices rise. For example,\u00a0during\u00a0the recent rally, Egypt destocked significantly, China released sugar,\u00a0and Vietnam sold sugar. This was not necessarily\u00a0additional\u00a0production; it was existing stock becoming available to the trade.<\/p>\n When there is a\u00a0slight\u00a0tightness on a production-consumption basis and prices\u00a0rally, surplus stocks from many countries can be exported.<\/p>\n The ratoon nature of cane also matters. When there is a true deficit, and prices rise enough to incentivise more production\u2014as in 2022\u2014we see acreage expansion, increased fertiliser use and a relatively quick supply response. We saw something like a 15 million-tonne increase in production over a couple of years, which is significant.<\/p>\n Once that expansion occurs, sugar moves from origin to destination and\u00a0is stored somewhere. It can then re-emerge when prices rise during a short-term production-consumption deficit.<\/p>\n So\u00a0the market is not\u00a0structurally\u00a0in surplus on a production-consumption basis. But it often\u00a0holds enough stocks that, from a trade-flow perspective, it is rarely truly short. Prices can\u00a0draw\u00a0that sugar out.<\/p>\n What\u00a0does the future hold for the\u00a0sugar market?\u00a0<\/strong><\/p>\n Some of the\u00a0major trends\u00a0over\u00a0the past five to 10 years are likely to continue.<\/p>\n First, sugar consumption is unlikely to grow anywhere near as fast as it once did. We see this in Europe, the United\u00a0States\u00a0and other developed markets. We also see the impact of new weight-loss drugs,\u00a0with\u00a0people cutting\u00a0back on\u00a0carbohydrates.<\/p>\n Historically, the industry needed to increase production consistently,\u00a0perhaps by\u00a07\u20138 million\u00a0tonnes\u00a0every five years,\u00a0just to keep\u00a0pace\u00a0with consumption. That may no longer be necessary.<\/p>\n Second,\u00a0climate change\u00a0has made\u00a0the\u00a0weather more volatile and less predictable.\u00a0Heat, drought,\u00a0erratic\u00a0rainfall, El\u00a0Ni\u00f1o\u00a0and other weather effects can\u00a0wreak\u00a0havoc with production.<\/p>\n Third,\u00a0deglobalisation\u00a0may lead to more\u00a0regionalised\u00a0world trade. Supply-chain disruptions\u2014such as a closure of the Strait of Hormuz\u2014show how much food moves through strategically important regions. Countries may begin to hold mandated stocks of key foodstuffs and strategic grains. They may also\u00a0seek\u00a0to develop more regional supply chains,\u00a0particularly for\u00a0white sugar.<\/p>\n Brazil and Thailand may remain dominant origins for\u00a0raws, while whites may increasingly\u00a0flow\u00a0through regional destination refineries.<\/p>\n Since the 2008\u00a0financial crisis, the world has\u00a0generally pursued\u00a0deliberate destocking at destination because supply chains appeared resilient. Recent geopolitical events may change that. The move toward greater destination stocks and more regional supply chains could be a significant structural shift.\u00a0Fourth, sugarcane\u00a0should continue to lose market share to corn in ethanol production.<\/p>\n What would you say to a young graduate considering a career in physical sugar trading: Great idea, or are you mad?<\/strong><\/p>\n This is not the best time to be a sugar trader, as margins and value creation are under pressure everywhere. But that is cyclical.<\/p>\n There will be moments again when physical trading offers more value and interesting convergence plays in\u00a0raws\u00a0and whites. Sugar\u00a0remains\u00a0a great commodity market. It is liquid, based on an FOB contract that is\u00a0relatively easy\u00a0to understand, and has multiple deliveries throughout the year.<\/p>\n I would encourage\u00a0a young person\u00a0to enter the sugar market. But I would also say: find a company with good teachers and mentors who can pass\u00a0on\u00a0their experience. Picking the right company and individuals is important.<\/p>\n Thank you,\u00a0Philip,\u00a0for your time and input.<\/strong><\/p>\n \u00a9CommodityConversations\u00ae2026<\/p>\n The second edition of my book, The Sugar Casino, will be published in September.<\/p>\n After a\u00a030-year career at the world\u2019s\u00a0largest trading companies,\u00a0including\u00a0Cargill, Bunge, Wilmar and Engelhart, Philip\u00a0has set up Rhino, a consultancy, to share his market experience and\u00a0expertise\u00a0with producers,\u00a0consumers\u00a0and hedge funds.\u00a0For my first question,\u00a0I asked him\u00a0how\u00a0the\u00a0four trading\u00a0houses\u00a0he\u00a0had\u00a0worked for\u00a0differed.\u00a0 Bunge and Cargill were culturally aligned and relied heavily on communication across different parts\u00a0of the business. They consistently focused on internal … <\/p>\n![\"\"](\"https:\/\/i0.wp.com\/commodityconversations.com\/wordpress2\/wp-content\/uploads\/2026\/08\/Sugar_Casino_Final_MORE_002-3.jpeg?resize=196%2C300&ssl=1\")
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