Tuesday, 17 July 2012
The October’12 contract climbed this reporting period (2 to 13 July) as the market responded to a tightening global supply picture and potentially positive macroeconomic news following political developments in Europe.
Positive price movements in other commodities spilled over to sugar and also helped push the contract up slightly. However, any rally seemed to stall as the contract approached US23c/lb and sparked producers to begin selling.
The October’12 contract opened at US21.08c/lb on Monday 2 July and finished at US22.73c/lb on Friday 13 July.
Poor weather continues in CS Brazil
Wet weather continues to contribute to a tightening supply picture in Centre South (CS) Brazil. Over 100 millimeters of rain in this first half of July caused mills to lose 11 days of crushing during the fortnight. The heavy rain is also affecting the quality and sucrose content of the cane. Predictions are for rain to continue in both growing and port areas over the next few weeks.
UNICA recently released crop results for the second half of June which detailed the toll that the rain has had on the crop to date. During the second half of June, only 31.7 million tonnes of cane were crushed in CS Brazil, a drop of 25 per cent on last season. Sugar production for the fortnight was also down, measuring 1.8 million tonnes, or 30 per cent behind the same period last year.
On a cumulative basis to date this season, 128.31 million tonnes of cane have been crushed in CS Brazil, 27 per cent less than last year. Cumulative sugar production in CS Brazil for the season to date was 6.7 million tonnes, 28 per cent lower than the same time last season.
Meanwhile, logistics delays continue to increase and the queue at Brazilian ports has reached record levels. Many ships in line to depart will not be able to leave Brazil before mid-August. The 2.77 million tonnes of sugar waiting to be shipped is a record but, even as the logistics delays continue, end destination buyers continue to exhibit significant demand.
China lining up to buy
China is one of the end destination buyers that continues to exhibit strong demand for sugar leaving Brazil. Over 600,000 tonnes of the sugar waiting to ship from Brazil is nominated for China.
Up to recently, China’s private sector has been undertaking opportunistic buying based on the import prices on offer. Analysts have reported that many of these importers had been running their stocks down, waiting for the Brazilian harvest to come to the market.
Whether this demand will continue depends on whether the Chinese Government continues their policy of supporting domestic sugar prices.