Author: Michael Ferrari, PhD
VP, Applied Technology & Research
After ICE sugar plunged through the 20- cent barrier, it seems to have found some stable ground right around the 17 cent range. Favorable Brazil (Centre-South crop) conditions are anticipated to continue, which will help boost current and next crop year production numbers, aiding the shrinking, but still present, global supply deficit. The retreat from the 28-29 cent level seen less than 60 days ago is justified, but the fair value range may have been overshot in the slide seen over the last month.
While healthy crop numbers at the primary origins will continue to chip away at the physical shortfall, the fact remains that the deficit still exists and until India’s production can truly ‘rebound’, there will still be more potential buyers than sellers in this market. Remember, crude oil is still sitting around $80/barrel, and this continues to make cane ethanol an attractive option for Brazilian mills; as long as the premium for cane ethanol is commanded, this has the potential to keep physical sugar from being exported from Brazil’s ports, thereby maintaining net deficit status for the sweetener.
