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World Sugar Update: Strong Production Numbers From Brazil and India

Apr. 24, 2011 8:06 AM ETSGG, DBA
Michael Ferrari profile picture
Michael Ferrari

Following the run up to nearly 33 cents, world sugar futures have retreated and stayed in the 22-24 cent range for much of the week. The market is expecting strong production numbers from Brazil and India, the two largest producers, and there seems to be optimism among analysts that the global S-D balance will finally shift to the surplus side in the coming months.

In the USDA Foreign Agriculture Service (FAS) April attache report, their outlook stated that Brazil cane production will increase 2% (to 631 mmt) in the 2011/12 marketing year (MY), with 569 mmt of this volume coming from the Centre-South; the 569 mmt projection is +12mmt over the 2010/11 MY and largely the result of an expansion of hectares for sugarcane, rather than a favorable weather pattern.

See the table below taken from the attache report for harvested hectares over the last 6 seasons. This is confirmed by the relatively flat total reducing sugar (TRS, or industrial yield) when analyzed Y/Y. Readers should note that a drier pattern in key mid/late crop months actually serves to boost yields, and tends not to be an inhibiting factor.

[Click to enlarge]

While the Weather Trends view is also for an increase in Y/Y production for BR (between +1.3% and +1.6%), we feel that the USDA estimate may be too optimistic. Further, even with higher production numbers out of Brazil, domestic ethanol demand for flex-fuel cars coupled with high crude prices will still keep a premium built into the #11 price, so the downside price potential remains limited between now and October. Satellite derived vegetation indices for many of the Centre-South cane growing regions are on par with last year which was considered an average weather year for cane in BR.

Other FAS estimates carrying significance include their view for

This article was written by

Michael Ferrari profile picture
Michael Ferrari is a Senior Scientist and Director of Commodities at aWhere, where his research and technology transfer activities focus on improving their global agricultural/climate/life sciences data platform. He is also the founder and principal at Atlas Research Innovations, which provides applied research and bespoke services to clients in the private and public sector, government, and academia. Previously, he was the Director of Agricultural Commodity Research & Risk Management for The Coca-Cola Company, the Director of Informatics and a Principal Scientist at NASA for Computer Sciences Corporation, Vice President of Applied Technology and Commodities at WTI, and a Research Scientist and Commodity Trader at Mars. He spends much of his time building tools and models with sensors and data, creating algorithms, and directing commercial research activities towards the examination of the global food and climate complex from a systems perspective. Michael is a frequent speaker at scientific, commodity and data/technology conferences around the world, where his talks focus on the confluence of human-environmental-technology interaction and the broader relationship of these topics to societal issues including climate, food and energy security, and global change. Michael holds a PhD in Geophysical Fluid Dynamics and Environmental Biophysical Modeling from Rutgers; his doctoral work in numerical modeling was supported by the NASA Goddard Institute for Space Studies.

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