Australia is now thought to have lost 10% of its 2011/12 sugar production as a result of cyclone Yasi. This amounts to 380,000 tonnes and takes Australia slightly below its 2010/11 production.
News from Australia and India concerning a revised outlook for production and doubts concerning its OGL sugar exports have given sugar prices support. There may be a bullish trend in the short term. The drop away from recent peaks has allowed physical buyers to step in.
White sugar futures rose by 1% to close just shy of $800.
With current supply and demand figures we could perhaps see a white sugar price of $500 per MT by the end of the year. If there is such a fall there would be a similar fall in raw sugar prices. A white sugar price of $500 implies a $100 fall in prices per MT from current levels of over $600 per MT.
There are however a few assumptions to this. Namely, that production is not impacted negatively in Brazil and India, the weather does not have any surprises in store for the market and that the line-up of vessels loading sugar at Brazilian ports does not continue to grow significantly beyond the 100 at present waiting to load.
The above does is not intended as investment advice and is solely for academic purposes.
The number of vessels lining up to load sugar at Brazilian ports has continued to increase giving support to sugar prices which bounced back today after coming off recent 7 month highs. Both raw and white sugar futures rose in New York and London respectively but without revisiting previous 7 month highs. Over 100 vessels are now waiting to load sugar at Brazilian ports.
Excessive rains in India are also thought to have given sugar prices some support. Production figures will be watched to establish if output is likely to decrease. If production figures are seen declining significantly it is likely that this will result in further upward support of sugar prices. However, if the expected 10% fall in production is offset by higher production elsewhere in India then recent heavy rains will have had no significant overall impact on production or prices.
Meanwhile as a result of poor harvests this year and last Mexico is to import 100,000 MT between 10% and 15% of which is expected to come from Nicaragua. Mexico will not apply a tariff to the Nicaraguan sugar and will only charge up to 10% of the usual $360 per MT tariff to the remaining imports.
The above factors may see the markets test recent 7 month highs tomorrow.
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