This lower crop combined with the early fast pace of exports, means the supply in Q1 is going to be significantly reduced. This in turn will likely have a forceful impact upon world prices - both on the physical and futures pricing.
NEXT SEASON’S HARVEST Longer term there could be a problem brewing for the market. If farmers have been forced to replant burnt ratoon cane there will likely be a reduction in the total area of cane to be harvested next season (2025/26). Since the start of the season the extremely dry conditions have stopped farmers renovating cane and this will lead to an older age cane profile in 2025/26, which will drag down average yields. The market will increasingly look towards 2025/26 and how early the mills will start crushing. A drought and fire affected crop may need more time to develop which may impact mill opening dates. This could create longer lasting issues going forwards.
Based on the nature of the Q1 2025 outlook, and if the market were to run into such potential Brazilian production issues, then the chart below begins to look very interesting (dated September 2024).
THIS IS AFTER ALL A GLOBAL MARKET, BUT BRAZIL IS STILL THE LARGEST PLAYER!
FIB RETRACEMENT An upwards move through 20.00c and then onto the 38% fib retracement target of 21.58c would look to be the biggest hurdle to take on. A move north of 22.00c and the possibility to take on the 50% Fib retracement line at 22.83 could look like a reasonable area to target.
As of writing the funds are still short, this does lend support to a decent push higher if our thinking were to come to fruition. For the funds to add 150k-200k of longs would not be unheard of, especially if we start to break these technical resistance areas. If we do attack these levels, this could well propel the market to the 62.00% fib of 24.08 and maybe even attempt a look towards the January 2024 high of 24.62c.
Of course, the Sugar market is made up of more than just Brazil, so we are mindful that we must pay attention elsewhere. This is after all a global market, but Brazil is still the largest player!
ADMISI Softs & Ags team E:
SoftsAndAgs@admisi.com T: +44(0) 207 716 8888
SB1 Continuation Chart
Source: Bloomberg Finance L.P. 27 | ADMISI - The Ghost In The Machine | Q3 Edition 2024
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36
