After a period of relative calm, the sugar market has come to life with the focus on where the sugar is going to come from in the New Year.
Unofficial reports that India will be banning any sugar exports and the Thai crop continuing to suffer under a poor monsoon leaves Australia in the box seat.
The dream Brazilian harvest continues with weather, ATR and sugar mix combining to keep analysts revising up the final sugar tonnage. However, even with the record Brazilian production, upwards of 39M tonnes factored in, our forecasts remain for a significant deficit for next year.
This will be the fourth year out of five that global supply and demand numbers indicate a reduction in world sugar stocks. Our pools are well positioned to take advantage of any further price rises in the #11 contract, while already having some favourable hedging in place to protect against the downside.
For users of the popular GMPRS pricing mechanism the Mar/May 24 futures pricing structure will benefit from any first quarter tightness. Hopefully this will provide some attractive pricing for the production risk proportion of this year’s crop.
The other contributor to the AUD sugar price rise has been the slide in the currency to a recent low of 63.65. This has seen the AUD break out of the well-established 66 – 68c trading range that has characterised much of this year’s trading.
Concern about Chinese economic growth, a turnaround in the interest rate differential – whereby US longer-term rates are higher than Aussie rates – and a weakening of our core commodity export prices have conspired to turn sentiment against the AUD. The low last year was around 61.70 in October and many analysts are talking the AUD down.
Nevertheless, as is shown by the table below, in recent history, the AUD does not spend a lot of time below 65c. So even if #11 is to rise, the shine might be taken off prices if the AUD was to rally at the same time.
For any queries, please contact Proserpine Grower Marketing Consultant Shirley Norris on 0437 803 019 or Plane Creek Grower Marketing Consultant Angus McKerrow on 0419 238 536.
