Frankfurt (GodmodeTrader.de) – By mid-November, the raw sugar price had worked its way up slightly above the pre-Corona level and to a three-year high. This was driven by the prospect that, according to the International Sugar Organization ISO, there will be a supply deficit of 3.5 million tons in the 2020/21 season despite the Corona crisis, as Commerzbank analyst Michaela Helbing-Kuhl writes in the current “TagesInfo Rohstoffe” .
The increase was supported by the build-up of net long positions to the highest level in four years by the short-term oriented market participants. A record high production came from Brazil in 2020/21, but the processing season there has largely ended and other providers such as Thailand or the EU have only come up with disappointingly low quantities, it continues.
“In addition, unlike in previous years, India has not yet made a decision in favor of subsidized exports. Starting at 15.5 US cents per pound, a retreat began – with some severe fluctuations over the course of the day. Because not all observers expect a deficit and the recent shutdowns are likely to put a further strain on demand, so that many market participants decided to take profits, ”said Helbing-Kuhl.
In addition, the drought in Brazil was alleviated by rainfall, which improves the outlook for 2021/22. And for the current season, the forecasting authority Conab recently increased its estimate for Brazilian sugar production to 41.8 million tons (including 38.6 million in Center-South), an increase of 40 percent over the previous year. In her last estimate in August she assumed 39.3 million tons. Even if there were a global deficit – which is controversial anyway – it should be smaller, it continues.
“Yesterday, raw sugar closed at 14.1 US cents a pound. However, the price could be boosted today by the fact that the director of the Brazilian sugar industry association Unica expects a ‘significant’ decline in production for the coming processing season from April. For one, the sugar content of the cane, which has benefited from the drought this season, is likely to be lower. On the other hand, the drought of the last few months is likely to have an effect, at least in the early part of the new season, in the form of lower sugar cane yields per unit area ”, says Helbing-Kuhl.
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