Author: Michael Ferrari, PhD
VP, Applied Technology & Research

The Indian Met Dept’s weekly monsoon progress map is shown below.  This map shows seasonal totals by geography, and references the totals to normal for the specified time period.  Moisture deficiencies to date are evident in the central/northern parts of the country.  The 2010 monsoon did get off to a (relatively) healthy start, per the WTI forecast.  However, by scanning many of the market discussions on trade wires early this week, one would believe that everything has been fine so far this season – this is clearly not the case, particularly with respect to sugarcane.  While there is still plenty of time left to make up for season-to-date deficits in precipitation, even though the pattern has been favorable for the subcontinent’s southern growing regions, the same can not be said for growers in northern states.  

The concerns have been for current crop year output, but I am also starting to think even more about potential production shortfalls for the crop year starting in October.  The world is counting on a shift back to net surplus status regarding physical sugar for the coming year – recent statements by various sugar analysts, consultants, and even the International Sugar Organization underscore this point.  Brazil’s healthy crop will move the needle in the right direction, but the global supply outlook is also figuring in a bumper crop (Oct/Sep 2010/11) for India as the world’s second larger producer of the sweetener.  While the positive year over year change in Indian cane production will help to narrow the deficit, the current weather pattern may not allow these estimates to be met, and revisions to supply estimates may follow.

 Spot sugar futures are already above 19 cents this morning (chart from Finviz.com).