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

If the recent widespread flooding across Queensland wasn’t enough, Cyclone Yasi just made landfall.  This impressive system will only add to the market uncertainty, particularly in the commodity sector.

The sugar sector has wasted no time in reacting; we are also expecting additional strength in coal.  The March ICE sugar futures contract has jumped around 5% in trading Wednesday, approaching the 36 cent barrier.  Highly destructive winds and additional flooding will keep fields underwater, and lodge susceptible cane.  As many analysts (who we were not in agreement with) were on the record recently with expectations for a global shift to to positive side of the sugar supply balance sheet in 2011, this news does not help their case.

While the current and coming crop year should see better crops from the world’s top producers (Brazil, India, China), Australia is still an important origin for sugarcane, and the pattern over the last few months coupled with additional expected damage from this current event will certainly limit production & yield data. 

 Supply uncertainty across the agricultural commodity spectrum, higher oil prices, civil unrest in MENA (remember Egypt is an important region re:sugar S-D)  and a struggling $USD will all contribute to near term strength in the sweetener sector.