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

Readers of this column should no doubt be aware of our bias towards the importance of India with respect to the amount of physical sugar that is available to the world market at any given time.  We have stated numerous times that the sub-optimal pattern with respect to where rain has been falling and where the country’s sugarcane plantations in northern India are located will result in a crop next year which is shorter than many analysts are currently expecting.  India’s position in the market notwithstanding, Brazil, as the world’s largest sugarcane producer, has the potential to move the market with short notice.  Our clients have also been able to take advantage of the current volatility in the raw sugar futures space, as the ‘news’ of Brazil’s dryness now has traders worrying that supply estimates may have to be revised downward again.  To our clients, however, this is not news.  We have expected decent numbers for both current and upcoming crop year production from Brazil, but our crop expectations have been much more conservative than the rest of the market.  The Weather Trends outlook has been built upon the view that the dry pattern that has affected Sao Paulo and western Parana will serve as a production (and yield) inhibitor, and the current market support (OCT-10 futures up over 3% today) is a result of this realization.  The charts below show the Weather Trends long range forecast by week (y/y change) and the solid line is the observation.

BRAZIL – Country Precipitation Summary

 

BRAZIL – Sao Paulo Precipitation Summary

 

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