Weekly World sugar update
October sugar finished last week at 9.48 c/lb, as bearish fundamentals continue to dominate the global S-D picture. While many production estimates form various analyst do vary, the global sugar surplus is now estimated at approximately 10.8 mmt accirding to the ISO. This surplus is driver primarily by the expected production increases coming out of Brazil and India. Despiute some talk by analysts and traders that the return of the rainy season in Brazil’s Centre-South will cut into the current harvest and reducing crop numbers, the Weather Trends International long range forecast for the C-S still points to favorable conditions through November. The return of rain to the C-S is part of a seasonal pattern, which is something analysts seem to forget year after year. WTI’s antipation of this year’s return of the rainy season will serve to help the current and following crop year. Weekly rainfall totals will not be too high as to impede current crop harvest, but it will be enough to help early development for the cane to be harvested next year. Further, even if rains did retuen early, growers in C-S Brazil have the ability to extend the harvest, as we have seen on more than one occasion in recent years.
Beyond Brazil, the Indian Monsoon continues to help the crop as growers prepare for harvest. While this year’s pattern has not necessarily been consistent, it has provided adequate moisture at the critical stages in the growing cycle, so the crop will produce healthy numbers this season. It is important to remember that while rainfall totals have been lower than normal in the north (Uttar Pradesh & Madhya Pradesh), the timing of the rain events for sugarcane has been sufficient to help the crop along. While the supply side looks healthy, the strength of the Brazilian Real has recently devalued vs. the USD, and this will impact the availabiliy of World sugar in the short term. With a weak Real, Brazilian suppliers export less, and this could start to impact sugar for March08 delivery. In light of the healthy stocks, this is a factor that should be watched closely by traders in not only sugar, but all exportable commodities with origin in Brazil.
