Raw sugar deficit a boost for producers
THE fundamental shift in raw sugar market sentiment has continued in recent sessions, with a statistical global raw sugar deficit of between 10 and 15 million tonnes over the 2015-17 seasons finally giving Aussie sugar producers the upper hand.
QSL treasurer Stephen Stone said an important market dynamic was currently in play, with sugar consumers now the more vulnerable market participant and market speculators no more than short-term drivers of volatility.
Mr Stone said general market perception had discounted talk of a good crop in the world’s sugar powerhouse Brazil, and was now more focused on demand in Europe and Asia, and a lack of water for sugar producers in the Northern hemisphere.
“India and China are developing markets where weather has and may continue to cut production forecasts,” he said.
“The last time India had sugar prices at this level, the ICE 11 raw sugar price was trading closer to US30c/lb.”
Mr Stone said that due to a period of currency weakness, Brazilian producers were already well priced, which made continued sugar price strength more likely. Market upside for the 2016 Season remained more probable than deep price corrections to the downside. As a result, consumers were now hoping to see 14c/ lb-14.50c/lb for their underweight hedging programs.
In the white sugar market, refining premiums are currently trading at about US$110 per tonne and have spent very little time below US$90 per tonne in the past six months, after averaging US$85/t during the past two seasons.
“As a measure of demand, premiums continue to reflect a market becoming increasingly tight,” Mr Stone said.
The Brazilian Sugarcane Industry Association has delayed crop updates, diluting positive production news, and forecasters now suggest wet weather is on the horizon.