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It is now almost a certainty that the 2019/20 season will result in a global production deficit. Brazil looks likely to struggle to even hit last season’s meagre 26.5 million tonnes (down from the record 30 million tonnes in 2017/18). In India, plantings are down, as is rainfall. The first half of the monsoon has been poor although the second half is forecast to be more substantial and extensive. This means predicted sugar production could be down over 20% from the record 33 million tonnes of 2018/19. A similar picture is seen in Thailand where low prices are impacting on planted areas and crop maintenance. The EU has also cut their planted area as processors negotiate new lower prices with their farmers. This all adds up to the current view that a global deficit of around 3.0 million tonnes will be seen. Unfortunately, analysts see this as too small to eat into stocks enough to have any major impact on prices in the short term.


Despite this rather pessimistic view, some traders and analysts still see prices improving by the end of this year. A recent Reuter’s poll suggested that prices will rise to 13.80 by the end of the year in raw sugar. However, given that the wide range of opinions in these polls are rarely accurate and sometimes are based on wishes and not logic.


Looking further forward than 12 months in the sugar market requires the need of a crystal ball. Nevertheless, it is likely that only a major weather issue will cause prices to improve back to the 2016 levels of above 20 cents. Without nature intervening it is likely that India will continue to make it advantageous for their farmers to grow sugar cane. India may well use more cane for ethanol production but it will be several years before volumes grow enough to have any sizable impact. In Brazil sugar production will quickly grow if the ethanol parity price is breached.


Howard Jenkins E: howard.jenkins@admisi.com T: +44(0) 20 7716 8598


IT COULD BE SAID THAT VOLATILITY IS THE FUEL OF FUTURES MARKETS. WITHOUT IT THE MARKET BECOMES LETHARGIC AND RANGE BOUND.


11 | ADMISI - The Ghost In The Machine | July/August 2019


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