Next quarter to clarify future tone of sugar market – Rabobank

The coming quarter will clarify some pivotal issues for the future tone of the sugar market, such as the final tally for the current Indian and Thai crops, and the extent to which weather permits millers in Brazil’s Centre/South to get a head start on their 2016/17 harvest, Rabobank said in its latest outlook report.

“In the next couple of months we should learn more about new crop prospects in the EU and in India, and we will also see how Centre/South Brazil’s new crop and the BRL/USD exchange rate develop. All of these factors are important contributors to price formation over the rest of the year”, according to Andy Duff, Rabobank Global Sugar Strategist.

As a result of the projected deficit, by the end of 2015/16, the global stocks-to-consumption ratio is expected to dip very slightly below its ten-year average level, suggesting a return to a more balanced supply/demand position. What this means in terms of an appropriate price has to be weighed together with the fact that the US dollar is at its strongest level versus other currencies in over a decade, the report said.

The first quarter of 2016 saw world raw sugar futures prices hit some severe turbulence. Futures began sliding in January, hit a low point in mid-February, but rapidly recovered by early March, the report said.

The absence of any significant change in the fundamental outlook meant the decline was fund-led, driven by general market unease against a backdrop of falling oil prices and doubts about Chinese economic growth.

In more recent weeks, fundamentals have reasserted their role as the prime driver of prices. Asia’s major players—China, India and Thailand—have all seen more questions raised regarding their output for the current season, the report said.

 

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