Better weather in Brazil and India
Despite the fact that the week didn’t close much higher than it opened, last week was an interesting week for World sugar futures. Sugar for October delivery finished trading last Friday at 9.79 (Oct. sugar finished the previous week at 9.43) and March closed at 10.08. These are the highest levels that the #11 market has seen in the last month. There was not much activity early in the week, but by mid-week, news out of Brazil and India battled to push prices to the 10 cent mark. The recent speculation on Brazil diverting more cane to ethanol seemed to take hold in the market, and this would decrease sugar exports out of the country. Czarnikow reported that Brazil may export up to 7.5% less sugar in the current May/April (07/08) marketing year, with most of the diversion coming from Centre-South cane. Higher demand from Brazil’s automotive sector is fueling the need for more ethanol domestically. Sugar may also have been riding the wave of bullish commodity prices that some traders are attributing to the recent Fed interest rate cut, but this is not really a significant factor in the recent price move. There is probably more connection to the weaker $USD than the Fed inspired activity. It remains to be seen if this decrease in Brazilian sugar will contribute to any tightness in supply, but the recent news would certainly be a first step in that direction. Countering the bullish news out of Brazil, India has been discussing increasing supplies, according to their Agricultural Minister Sharad Pawar. Mr. Pawar has stated that next year’s output could increase up to 15% over the current crop year, which much of this increase going to exportable sugar.
All of this news has traders eyes on weather in the major origins. While everyone in NY is talking about the dryness in Brazil, the C-S continues to follow the pattern that Weather Trends International had projected last year. Last week was some scattered moisture move into the Sao Paulo and Minas Gerais region by the end of the week, and more is anticipated for the current week (slightly more than same week LY). Indian monsoon activity will be strong this week, with two separate systems bringing moisture to Bihar and Eastern U.P.; the current week’s pattern will bring ample moisture to all cane regions in the north and south.
