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

 

Sugar demonstrating another week of strong performance as today’s activity (Mar11) closed at 27.81.  View the ino.com chart below for 5 day performance.

Judging by much of the market commentary we’ve seen over the past couple of weeks, the strength shown in the sugar market since August seems to be catching many off-guard, but as we have been discussing, this strength in the sweetener sector should be anything but a surprise.  Looking at March2011, raw sugar futures are now near 28 cents, with fundamentals driving much of this week’s news.  Dollar weakening is helping strength in commods; however the 2010/11 global crop year which started on 01 Oct, was supposed to be the year where global supplies demonstrated a strong shift back into positive territory, evidenced by healthy projected surplus numbers coming from the largest producing countries.  But drought in Brazil which will limit sugarcane production this year, is finally on the radar of traders.  The USDA expects Brazil to harvest about 3% less cane than their previous estimate for the May10/Apr11 crop year, citing drought in the Centre-South as the primary limiting factor.  The maps below show August and September 2010 monthly precipitation vs. normal.  Couple this weather limitation in Brazil with the crop concerns that we have been expresseing for India, which  have not been fully priced yet, and 29/30 cent world sugar becomes a very real possibility in the coming weeks.