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Sugar Market Vulnerable to Short Covering


Extremely oversold conditions in July sugar have left the market vulnerable to short covering, especially with bullish supply numbers coming from three of the world’s biggest producers. USDA FAS has projected India’s 2024/25 centrifugal sugar production at 34.5 million tonnes, but it also reduced the 2023/24 forecast by 2.0 million tonnes to 34.0 million. They put 2024/25 exports at 3.7 million tonnes, stating that they expect the Indian government to maintain its export cap to meet the needs for domestic food consumption and the Ethanol Blending Program. The USDA attache in Brazil forecast that nation’s 2024/25 nationwide sugar production at 44.0 million tonnes versus an upwardly revised 2023/24 forecast of 45.54 million. Thailand’s Sugar and Cane Board said that their nation’s 2023/24 sugar production will come in at 8.71 million tonnes, down 21.7% from 2022/23. Egypt’s state grain buyers, the General Authority for Supply Commodities (GASC) bought 250,000 tonnes of raw sugar in a tender versus a previously announced figure of 200,000. Shipments are to arrive from May to July.

sugar cane in field


First quarter grinding totals for Europe and Asia had smaller than expected declines from a year ago, and the North American grind came in substantially higher than a year ago despite cocoa prices being three times higher. This eased concerns about high prices cutting into demand, but apparently processers were able to rely on existing supplies that will have to be replenished at some point. The West African supply situation remains dicey, and that continues to underpin prices. There is daily rainfall in the forecast for key growing areas through this weekend, which should benefit upcoming production, but this year’s mid-crop is widely expected to come in far below last year.


The coffee market has avoided significant downside follow-through from last Thursday’s wide-sweeping reversal. Vietnam’s supply issues continue to underpin prices. Drier than normal conditions have the market expecting their 2024/25 crop come in lower than 2023/24. This has encouraged farmers to hold onto their remaining supplies. Growers in Karala, India are complaining that the lack of rainfall since January and high daytime temperatures are cutting into their robusta crop. Groundwater supplies are down as well due to successive years of drought, which reduces growers’ ability to irrigate. India is the world’s eighth largest coffee producer, and they mostly grow robusta. ICE exchange coffee stocks increased by 7,980 bags on Friday to reach their highest level since May 2023.


The steady rise in the dollar over the past several months undermines US export prospects at a time when competition is expected from Brazil and Australia as their crops come in. US soil moisture conditions last week were much improved over the past two years, with approximately 9% of US production in an area experiencing drought versus 40% a year ago and 55% two years ago. This bodes well for a strong start for the US crop this year. However, with the market having sold off to its lowest level since late last year, it could be vulnerable to any sort of bad weather news.


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