NY sugar back down to lows
Good weather in the Center-South and India
supersede bullish macro scenario and CFTC
Even with the CFTC
report showing that the speculators’ net short position will likely exceed the historical
maximum, sugar futures fell yet again in today’s session, with that category
increasing bearish bets. In addition to the funds’ positions, the market also
ignored the macro scenario, characterized by the USD’s depreciation against the
BRL and the second straight rally for oil on the NYMEX.
The main bearish
factor was weather in Brazil’s Center-South. Meteorologists expect weather to
continue on with cool, dry conditions, which is ideal for the plants’ TRS, thus
benefiting sugar production.
In India, total
precipitation from monsoons is still 2% above the historical average for this
time of year, even with monsoons arriving 11-16 days late in the northern
regions. For the two states that need these rains the most- Maharashtra’s total
precipitation was 9% above normal while Karnataka’s volumes were similar to the
Despite hot, dry
weather in Europe’s top beet-producing countries, France and Germany, JRC-MARS,
an agricultural survey agency linked to the EU, maintained average productivity
estimates for the bloc’s 2017/18 crop. Therefore, average yields are expected
to be 73.9 t/ha, 3.1% above the five-year average and 2.1% above the last crop.
Estimated agricultural productivity for EU beets
As for France, the
survey agency indicated that soil moisture is significantly below normal,
though rain in coming weeks should be critical for productivity as there are
still no consolidated impacts. In Germany, plant development is expected to be
normal despite reduced agricultural productivity estimates by 0.3 t/ha.
producer country with the least worries, Poland, had its productivity estimates
reduced by 2.9 t/ha. Due to the opposite conditions: moisture and cold. Another
important beet producer that had lower productivity estimates was the
Netherlands - by 2.1 t/ha. However, some projections rose in less relevant
countries such as Spain, Lithuania, Finland, Italy, Romania, Croatia and
already offering better returns in Goiás
Even with a 2.2% drop
in hydrous prices in Goiás last week, which fell back to lows in recent years,
production is already 1.1% better than VHP sugar exports for state mills.
According to INTL FCStone estimates, considering current ethanol price levels
and the USD exchange rate, in order for sugar to provide better returns for
Goiás mills the price of the nearby contract on the ICE/NY would have to head
back to at least US¢12.75/lb.
Arbitrage: VHP exports and domestic ethanol sales -
Source: INTL FCStone.
For anhydrous ethanol,
which regional mills have preferred, production provided returns equal to 14.4%
more than raw sugar exports. For this variety to compensate, the price would
have to rise to US¢14.4/lb on the NY exchange.
Sources: ICE, Liffe, CFTC, CEPEA/Esalq, Consecana and
Sources: ANP, CEPEA ESALQ, BM&F Bovespa, OPIS,
Nymex, CME and INTL FCStone.