Author: Michael Ferrari, PhD
VP, Applied Technology & Research
This was issued on Monday morning, 14 Dec:
As there is no significant new fundamental news in world sugar, we turn the focus go the technical indicators regarding short term behavior in sugar futures. Tight global stocks at the end of the year are already priced in, and we expect another week extending the pattern seen over the last several weeks where early performance Monday and Tuesday will see a rapid rise, which we have seen in the move to the 24.7 range in Mar10 futures, followed by a decline to the nadir (of recent weeks), which is probably right around the 22.5 to 22.75 cent range.
On the global weather side, El Nino conditions continue to develop, with a marked strengthening of both the areal extent and the magnitude of the warm Pacific temperature anomaly when viewing the last month (below left) vs. the season (below right). The El Nino teleconnections are now more defined, particularly the equatorial warm mass, North-Central Atlantic warmth, and the warm/cool dipole off of the South American Atlantic coastline. This pattern supports our view of the type of climatic regime to expect as it pertains to the primary global sugarcane origins. Despite some of the pending dryness in regions including India and Australia, a favorable weather pattern is likely in Brazil’s Centre-South, where strong production will start to chip away at the current global deficit. Brazil’s Agriculture Ministry is already calling for a 10% increase in Y/Y output (est. 34 mmt).
