In the coming weeks, raw sugar (ICE) may be testing new highs as more emphasis is being placed on the pending market tightness, driven by the current production deficit in India.  White sugar in London is also trading at the highest levels in over 20 years.  Currently, we see a favorable global macro picture, which is spurring the broader commodity complex (ags/energy/metals) to trade at higher levels, but the biggest factor in sugar is the fear of a widening gap between supply and demand into 2010.  And the weather news is not coming from the world’s #1 producer (Brazil); rather, ti is coming from India.  Weather Trends clients had our forecast for a poor 2009 monsoon as early as last fall.  Despite the significant lack of rainfall this year, the Indian Met Dept has yet to decrease their outlook since their 24 June statement.  At this stage in the season, there is only one way to revise the seasonal projection; this is now not only affecting sugar, but also India’s grains/rice and tea crops.  As we have noted in previous letters, the bigger threat to sugar at this stage is for El Nino driven dryness (see map above) to curtail next year’s production, so we may be in for a large scale fundamental change in the world sugar market for 2010.

This entry was posted on Monday, August 3rd, 2009 at 1:50 pm and is filed under Agriculture, Biofuels, Global Commodities, Global Weather, Softs, Sugar, futures, weather. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.