The May 2010 contract opened the review period (1 March – 31 March 2010) at US 24.00 c/lb and remained on the defensive throughout the entire period, trading between US 24.00 – 16.17 c/lb.
The May 2010 contract followed a weaker London whites market which lost a staggering thirty-two percent of its value over the review period. The ICE No.11 May 2010 contract settled at US 16.59 c/lb at the end of the review period, a loss of US 7.41 c/lb.
The Centre South Brazilian 2010/11 harvest has commenced with approximately 6.8 mln Mt of cane crushed by 1 April 2010. Whilst the crush is travelling at a pace below forecast largely due to poor weather, it is expected that sixty percent of the sector will be in operation by the end of April 2010. As at 1 April 2010, 0.2 mln Mt of sugar had been produced versus 0.15 mln Mt last year. Analysts are forecasting that the total cane crop for 2010/11 will be in the order of 590mln Mt with total sugar production estimated at 34.1 mln Mt.
India’s sugar production has exceeded most analysts forecasts for the 2009/10 season with total output at 16.7 mln Mt for the period ending 31 March 2010, up 22% versus last season. Current estimates indicate that total output for the current cop will be 17.8mln Mt to 18.0 mln Mt given crushing will end in Maharashtra around 15 May 2010. For the 2010/2011 season, production may be as high as 23.0 mln Mt.
Speculators have reacted quickly to the change in market fundamentals by trimming their net long futures positions over the review period. In early March 2010, speculators were holding a net long futures position of 130,000 contracts which has declined to 91,000 as at 23 March 2010.
The Australian dollar (AUD) traded between AUD/USD 0.8936 – 0.9252 during the review period (1 March – 31 March 2010) and closed at AUD/USD 0.9172. AUD strength remains primarily from its yield advantage versus the US Dollar. The AUD is also benefiting from solid Chinese growth which is continuing to underpin commodities.
Article contributed by Aaron Aldenton QSL
19 April 2010