Simon Hood
Wilmar Manager Grower Marketing
The ICE#11 sugar contract continues to be weighed down by the growing 24/25 forecast global trade surplus.
The early start to the Brazilian harvest, and clear weather, has resulted in record breaking production numbers being posted in the UNICA half monthly production reports for April. Seasonal cane tonnages are up and so is the ratio of sugar to ethanol production, particularly for this early in the season. This is forcing analysts to revise their sugar production numbers for Brazil.
Additionally, much needed rain in Thailand is improving the outlook for this year’s crop to climb back above 10M tonnes of sugar production. Combined with incremental increases in tonnage for Europe, China and Central America, there is a growing consensus around another surplus year in sugar production.
The speculative money has sensed that the path of least resistance has been down, and has consequently moved to net short position on the market to around 50,000 contracts.
The good news is that global stocks are low and demand remains strong. Even with the significant pullback in prices, the forward market still exhibits a slightly inverted structure in which nearby prices are higher than deferred.
Australian sugar is selling well into our traditional Asian markets and the solid physical premiums paid for the 23-season crop look likely to be repeated into this year’s pricing. While Brazilian ethanol parity is still well below current market levels, the import parity for raw sugar into Chinese refineries is resulting in some fresh business and plenty of price checking.
Following the close of the 24 season pricing nomination date (April 30), the grower’s GEI sugar pricing mix has shifted back to traditional pool pricing mechanisms for price management. After a couple of years of record returns for our Production Risk Pool, this is not a total surprise.
Further, the large volatility of prices over the last 18 months has left some growers who forward price feeling a bit whiplashed. As with all choices, there are trade-offs.
For those in the pools you can never be sure of your final price until well after harvest has been completed, whereas forward pricing gives you certainty and control of your own income.
AUD Sugar Swap Price: 2024 season
AUD Sugar Swap Price: 2024, 2025 and 2026 seasons
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