Sugar #11 Futures Market News and Commentary
Oct NY world sugar #11 (SBV19) on Friday closed up by +0.01 (+0.09%), and Oct ICE London white sugar #5 (SWV19) closed up by +0.60 (+0.19%). Sugar prices moved slightly higher Friday on strength in crude prices. Higher crude prices are positive for ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing to ethanol production rather than sugar, thus reducing sugar supplies. Gains in sugar were limited Friday as the Brazilian real fell -0.05% against the dollar, modestly above Wednesday's 2-3/4 month low. A weaker real encourages export selling by Brazil's sugar producers. A positive factor for sugar was Wednesday's forecast from Citigroup for a supply tightening to a 2019/20 global sugar deficit of -7.2 MMT from a 2018/19 surplus of +2.5 MMT. Sugar has support from Unica data on Aug 5 that showed sugar production in Brazil's Center-South region in the second half of July fell by -5.5% y/y to 2.478 MMT, with cumulative production in the 2019-20 marketing year through July falling -9.9% y/y to 13.334 MMT. Another positive for sugar was the action by India's cabinet on July 24 to create a buffer stock of 4 million MT of sugar for 1-year starting Aug 1 in an attempt to lock up supply and support domestic sugar prices. An increase in monsoon rain in India is negative for sugar prices after India's Meteorological Department Aug 8 said India's July monsoon rains were 298.4 mm, 4.6% more than the long-term average. Big Picture Sugar Market Factors: World sugar production in 2019/20 (Apr/Mar) will climb +1% y/y to 180.7 MMT (USDA) after the +0.6% y/y rise to a record 185.2 MMT in 2018/19 (ISO). The world sugar surplus in 2018/19 fell to 1.832 MMT from the larger 2017/18 surplus of 7.3 MMT (ISO). Production by Brazil, the world's largest sugar producer, in 2019/20 will climb by +17.4% y/y to 34.1 MMT, after production in 2018/19 (Apr/Mar) fell -17.2% y/y to an 11-year low of 31.4 MMT (Conab). Production by India, the world's second largest sugar producer, in 2019/20 will fall -15% y/y to a 3-year low of 28 MT due to drought and a delayed monsoon season (India's National Federation of Cooperative Sugar Factories Ltd).