Author: Michael Ferrari, PhD
VP, Applied Technology & Research
Now that raw sugar futures have scaled back to the mid 20-cent range (a move that we have been anticipating), we have an even stronger conviction about a constructive pattern going forward. There is still a downside target for May to drop to the upper 24 cent range; however when we are looking at the next 30-60 days, there is more support for sustainable movement to the upside. Crude is once again approaching the $80 range, which at times (not always) can pull sugar along with it, although there may be some resistance via USD strength. In addition, there has been more chatter concerning increased domestic demand for sugar in India, as the country’s supply forecast is not anticipated to satisfy internal demand requirements. According to a recent government statement, the status of the domestic shortage is between 3 and 5 mmt (private estimates are placing the shortfall to be as high as 7 mmt), so any excess purchases to help satisfy demand requirements will pull physical supply off of the world market, thereby adding in price support to the upside.
At this time of year, more attention is then turned to the potential of the fickle Indian Monsoon season, and there are hopes amongst growers that this year will usher in a pattern that will help the crop recover from last year’s disappointing yields. WTI will be issuing a formal Monsoon forecast in the coming weeks. However, we can at this point say that we are expecting the critical onset period to be better than last year. Readers may remember that last year’s delayed onset set the growing period back in many regions between four and six weeks. It needs to be noted that while we are not expecting a poor start in 2010, we still are not seeing the development of a strong pattern to last through the entire growing season. As a result, while the conditions look to be favorable compared to last year, it does not look like a rebound in crop potential will occur until next growing season.
