The market rally that didn’t

Sugar cane producers holding out for market rally


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The 2017/18 global sugar surplus is projected to reach 4.5 million tonnes, and this figure has gained weight over recent months, says Rabobank commodity analyst Georgia Twomey (above).

The 2017/18 global sugar surplus is projected to reach 4.5 million tonnes, and this figure has gained weight over recent months, says Rabobank commodity analyst Georgia Twomey (above).

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The patience of sugar growers who held back on pricing their 2018 crop may not be rewarded.

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SUGAR producers who have held back from pricing their 2018 crop in the hope of a market rally are seeing their faith severely tested, with prices recently slipping below US14 cents a pound, according to Rabobank’s latest Global Sugar Quarterly.

The report says that while there have been some recent developments that might have been expected to inject a bit of adrenaline into the market they have been offset by expectations of higher exports from Pakistan, a big European Union crop, diminished Chinese imports and an upward revision to Brazilian output.

Any support for prices arising from more Indian imports or hurricane damage to crops in Florida and the Caribbean appears to have been muted by strong production prospects in key producing regions. The extent of the damage inflicted by hurricanes Harvey and Irma on the sugarcane crop is ongoing, with the damage in Louisiana looking to be mostly limited to water damage and lodging, while Florida’s production could be down by 10 per cent. There is little risk premium in today’s prices, with the 2017/18 global sugar surplus projected to reach 4.5 million tonnes, and this figure gaining weight over recent months.

While this surplus is not massive by any means, and any weather-related development in Brazil, India or Thailand could drive some upside to prices, Russia and the EU are set to harvest a bumper crop and Brazil, India and China are currently on-track to exceed last season’s production. For Australia, optimal harvest conditions have had a positive impact on the CCS (sucrose) levels, which are up across all regions compared with last season. This has driven up Rabobank’s expectations for sugar production in 2017/18, to between 4.7 and 4.8 million tonnes (raw value), to put it only marginally behind last year’s output – despite the fall in volume of cane crushed (estimated at about 34 million tonnes).

While this surplus is not massive by any means, and any weather-related development in Brazil, India or Thailand could drive some upside to prices.

The industry has welcomed news confirming Indonesia’s reduced tariff for Australian raw sugar exports to around five per cent, and the same concessional rate as Thailand.

  • Georgia Twomey is a Rabobank commodity analyst.

The story The market rally that didn’t first appeared on North Queensland Register.

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