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

 

Spot raw sugar futures exhibited another week of very strong performance last week, as the OCT contract started the week off around 21 cents, and traded progressively higher through the 23 cent barrier by Friday’s session. OCT is currently around 23. Another week of y/y dry conditions across much of Sao Paulo will likely be on trader’s minds at the start of this week – see the verification of our long range Sao Paulo precipitation forecast above (bars: WTI y/y long range forecast, line: obs).

So will the rally continue this week?  Brazil was the big market mover last week, but at this point, we have to be careful regarding our views on  whether or not the extent of the dryness in Brazil’s Centre-South, and the potential impact on sugarcane production, is priced in. In addition to  potential problem’s in Brazil, we still have reservations around the crop potential coming out of India for both the current and coming crop years.   This is an issue which we have belabored in previous reports –despite a good monsoon in the south, the northern growing regions (particularly those in Uttar Pradesh, the largest producing state) are still quite a bit behind their seasonal totals, and we feel that this will impact production for the crop year which starts in October.  Also, the La Nina pattern can tend to correlate with a period of extended dryness in South America, so uncertainties around crop size will likely remain in the market.