Tag Archives: sugar guru

Brazil’s ethanol in demand at the expense of sugar production.

Brazil’s forecast for the 2012/13 cane crush is unchanged at 512 million tonnes of cane and 31 million tonnes of sugar according to Datagro.  These figures are for center south production of between 545 and 575 million tonnes of sugar cane.  The price and demand for gasoline will determine sugar output in the coming season with U.S. demand for ethanol a possible reason for increased ethanol output in Brazil as opposed to sugar.  The U.S. is likely to import 2.5 billion litres of Brazilian ethanol up from 1.5 litres.

Dry weather resulted in Brazil’s 2012/13 sugar forecast being reduced by 1.5 million tonnes in September due to dry weather and lower yields.  Gasoline prices and U.S. demand for ethanol are variables likely to be monitored for further changes to forecasts.  Also being monitored is a possible decision by Brazil to increase the ethanol content in gasoline from 20% to 25%.  This would increase ethanol production at the expense of sugar production.

The increased demand for Brazilian ethanol described above would account for approximately 35 million tonnes of sugar cane. Hence an equivalent reduction in sugar production may be anticipated.

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Will India make up its mind?

No decision was reached during the previous meeting on whether to permit up to 500,000 tonnes of sugar exports under Open General Licence (OGL) due to the absence of a number of government ministers.  Discussions were widened to include a number of Indian government ministers due to the political sensitivity of the ‘agflation’ issue and the risk of food price rises.  A decision on the matter may be made in the next two weeks.

India’s indecision has ensured that sugar prices remain high in the face of tight supply.  India is the second largest producer of sugar and its largest consumer.

Circuit breakers spoil the party for commodity funds and algorithmic traders

ICE may accept advice of the World Sugar Committee and introduce circuit breakers when sugar futures, experience price spikes or high volatility.  Trading would be interrupted or halted when limits are breached.  This may decrease the volume of sugar futures trading if funds, computer and algorithmic traders and those trading volatility reduce exposure to the market.  However, the move is intended to reduce commodity price volatility and agflation.

Rule 3.36. World Sugar Committee

(a) The World Sugar Committee shall be an Exchange Committee and shall consist of at least seven (7) and not more than twenty-one (21) individuals who are actively engaged, or employed by a firm that is actively engaged, in trading world sugar. The Board shall endeavour to appoint representatives from diverse interests within the world sugar community, such as industry representatives, FCMs, asset managers and traders.

(b) The Committee shall have and may exercise only the power or authority of recommending to the Board any modifications to the contractual terms and conditions and advising the Board with respect to World Sugar Futures and Options Contracts.

EU permits out of quota sugar and imports without duty

The European Commission allowed 300,000 metric tonnes of raw or refined sugar without import duties.  It was also decided that 500,000 tonnes of out of quota sugar would be permitted.

The EU’s sugar management committee voted today to allow additional imports and the sale of out of quota sugar.  The sugar management committee’s decisions concerning the EU sugar market, import tariffs and subsidies are ratified by the European Commission.

EU sugar producers can sell limited quantities of sugar. The EU is to scrap a levy on out of quota sugar.  Licences for out of quota sugar would be confirmed following weekly applications. A Euro 500 per tonne penalty would be applied if the volumes were not filled.

Dacian Ciolos, EU farm Commissioner announced the news following a meeting with EU farm ministers today.  The news will be welcomed by refiners and sugar users as supply has been tight and companies, including confectioners, have faced difficulty obtaining supplies.

Mauritius sugar production falls 3.2%

Mauritius sugar production fell by 3.2% in 2010 to 452,473 compared to 2009 whereby the forecast for the year was 450,000.  The sugar industry in Mauritius makes up 3% of its GDP.  The 2010 crop was priced at MUR 13,500 per tonne up from MUR 12,800 six months ago. The rupee has strengthened against the EURO from MUR 44.50 to MUR 41.10 and higher Mauritian prices reflect higher prices in the EU and a weaker EURO.

Australian raw sugar exports to recover in 2012

Australian raw sugar exports are likely to be closer to 2 million tonnes in the 2011/12 season rather than the usual 3 million tonnes.  Exports are unlikely to recover and revert to the 3 million level until the 2012/13 season.  Cyclone Yasi hit Queensland and damaged its sugar cane crop in early February.  Queensland produces 90% of Australia’s sugar.

EU permits imports and out of quota sugar

The EU faces tight sugar supply with European buyers, including confectioners, finding difficulty buying quota sugar.  EU regulation for the sugar industry was revised in 2006 following a WTO decision that EU production quotas for each country should be reduced to the extent that the block becomes an importer of a minor part of its consumption with developing countries being granted preferential access as exporters to the EU, facing no import tariffs, and from 2015 without restrictions on the quantities exported. 

EU quotas for its sugar production first decreased in 2006 in the expectation that developing countries would export the deficit.  Such exports have not always materialised and more recently high world sugar prices have resulted in such sugar being exported elsewhere.  The EU, facing shortages, has decided to allow out of quota sugar and additional imports.