An explosive move in sugar has occurred the last 2 weeks on a combination of factors related to global weather. First of all, there are new reports about a lower Brazilian crush brought on my wet weather earlier this fall. Secondly, the previous drought in India from El Nino in 2015, caused farmers to plant less sugar cane and new reports have been coming in from India sources that production could fall dangerously low again, resulting in various export restriction policies. The chart at the bottom of the page explains more. The question in 2017 for the sugar market is A) Will crude oil prices continue higher resulting in Brazilian producers using more sugar cane to go to ethanol resulting in tighter sugar supplies; B) What global production will be in key countries such as Brazil, India and Thailand this next year. Currently, there may also may be some minor harvest delays in Thailand from wet weather, but over the next 6-9 months, some rebound in global production sugar occur unless El Nino was to form again. This could cap the sugar market later this spring and summer, though there are short term concerns about tight global supplies brought on by poor crops last year.
In contrast to these renewed concerns for the sugar market, global cocoa prospects have been improving, since our comments last summer. Cocoa prices have fallen some 25% the last few months and I see little hope for any major rally given poorer demand from the suffering European economy and good weather for most cocoa crops.
The one concern I have is growing dryness again in NE Brazil to Robusta coffee and too wet in Vietnam where some coffee plantations could be hurt again by incessant rains.
The global vegetation index below points out how global weather is affecting certain soft commodities. Not shown here is the incessant wet weather in Vietnam, following drought a year ago. These rains could further damage the Vietnam coffee crop in the days ahead. Drought in NE Brazil is continuing in some areas due to deforestation and not just the weather.
Our CLIMATELLIGENCE newsletter, released later in 2017 will give occasional longer term trading tips in commodities and ETF’s. After the recent big break in coffee on the weaker Brazilian Real and a big 2016 Brazilian crop, we recently advised buying the COFFEE ETF JO near the lows about a week ago
SOURCE—–NOAA STAR CENTER FOR SATELLITE APPLICATIONS AND RESEARCH
