Author: Michael Ferrari, PhD
VP, Applied Technology & Research
Sugar may start to turn constructive on analyst reports of a smaller than expected crop. We noted yesterday that one high-profile estimate has recently called for a 10.6 mmt surplus in 2011/12, which follows a slight return to positive supply balances in the current marketing year. However, as we also stressed, the Indian Monsoon is likely to get off to a good start in June, but mid-crop weather may serve to limit the strong numbers being discussed in the market. In addition, in a Bloomberg article today, there is now appears to be some sentiment that output in Brazil may temper some of the positive supply expectations for both the current and coming year. It is appropriate to take a look at some of the information that was presented to clients in a newsletter from February 28th (excerpt below), highlighting the potential supply risk:
“A smaller safety net –The reports that Weather Trends has been issuing regarding the global sugar supply situation has, for several months, been calling for a gradual improvement to the global balance sheet; however, we have always been somewhat less optimistic than most consensus estimates regarding the timing and velocity regarding the shift to surplus status. Most agencies had been figuring a number of +1.3 to +1.5 mmt for the 2010/11 (Oct/Sep) year, which is down from earlier projections in the +2.5 to +3.0 mmt range. The International Sugar Organization (ISO) recently issued a revision to their outlook, placing their expectation for 2010/11 at +196,000 mt, down significantly from their 1.3 mmt number from last November. Given the margin of potential error on these forecasts, 2010/11 could easily remain in deficit or at least at a break even point for the current marketing year. Further, there is still the potential for poor weather over the next couple of months to negatively impact cane devoted to the next (2011/12) season.”
Amidst strong global demand, weather will play a very important role in determining the size if the global 2011/12 balance.
