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

 

(chart from FINVIZ.com)

The chart above shows the run in raw sugar futures over the last several months.  Around mid (northern hemisphere) summer, the market started to creep upwards, reaching a high of around 33 cents in early October.  According to an article in Bloomberg today, estimates surrounding sugar output from India have come down, with a grower survey placing 2010/11 (Oct/Sep) output at 23.27 mmt, while the Indian Sugar Mills Association expects 25.5 mmt.  Here, it is now worth noting the Weather Trends post from August 19th; in this post, we stated that the Weather Trends number for India was in the range between 22.5 and 23 mmt, highlighting the potential for additional downside risk.  This was made when most in the market were expecting 26mmt+.  

The strong performance of Oct/Nov seen in the sugar market is not solely due to India’s weather – there have been well publicized problems in Brazil, Pakistan & Russia which are all contributing factors.  However, the view that was communicated to clients well in advance of other estimates is now verifying and providing support to a market which will see a lower global surplus than most balance sheets have been figuring since mid 2010.  Decisions on India’s export capacity will be the next milestone to monitor for a directional signal.