SUGAR: ANY CHANCE FOR A LATE SUMMER OR FALL RALLY ON WEATHER PROBLEMS?
In the midst of a developing drought for Parana and Sao Paulo’s sugar region, why have prices continued to stay weak? After all, Brazil is the top exporter of sugar in the world and the #2 sugar producer. However, the Brazilian Real looks like it is way over-sold and in addition, check out our “exclusive Climatech program. It uses teleconnections such as El Nino, ocean temperatures around India and many more to out forecast many other weather forecast firms weather months in advance. It is showing the potential for dry weather (red shows inches below normal rainfall prediction) in some key areas of India through August.
In my opinion, it will take a weather disaster in India later this summer and fall to get sugar prices out of the doldrums. Could this happen? Our new weekly commodity weather report will have the answer.
It covers many commodities, explaining how weather will (or will not) impact prices.
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In the meantime, here are my reasons that support sugar’s failure to rally:
1) Ethanol prices in Brazil are not keeping up with rising production, even in the face of dryness. This is partly due to the recent truckers’ strike and the weaker Brazilian currency, the Real. A weaker Real attracts more sugar exports, so Brazil farmers have incentive to produce more, due to an over-supply of ethanol
2) Sugar stocks in India are likely to double later this year. India production is expected to soar to over 33 MMT. This is quite large and will lead to 7.0 MMT surplus, at least, barring any new severe weather problem. However, if dry weather develops in central and southern India and persists through September, this could lower production a bit.
3) The maps (below) show generally good weather currently in India. The same is true for Thailand, the world’s #3 producer. The drought in Brazil bares watching but may not be enough to offset good weather and crops in the rest of the world
GLOBAL SUGAR WEATHER
1) While some dryness does exist in India’s north regions, most producing areas are in pretty good shape. However, our CLIMATECH study at the top of the page, illustrates the potential for the Monsoon to be weaker in the weeks ahead.
2) The El Niño drought (below) in Thailand in 2015, that helped sugar prices surge, as India also had a production shortfall. The map to the lower left shows generally much better conditions than 3 years ago.