Sugar Price Has A Welcome Bounce

Simon Hood
Wilmar Manager Grower Marketing
The sugar price had a nice rally in the last weeks of September leading up to the expiry of the October ICE #11 futures contract.
A combination of factors contributed to the price rise. Brazilian production continues to dominate sugar traders’ minds and, even though the crush this season is tracking ahead of the record-breaking crop of last year, it is the tail end that focuses analysts’ attention.
A growing consensus of a CS Brazil sugar production under 40M tonnes points to a near flat or balanced world supply and demand net trade position. With Brazil responsible for more than 80% of global raw sugar trade, seemingly small changes in their production variables can have significant impact on the world – and our – sugar price.
Take for example the sugar mix ratio, which is the allocation of sugar juice to crystallisation relative to ethanol production. Analysts had earlier revised up their maximum sugar capacity to around 52%+ based on significant investment in crystallisation capacity stimulated by the massive premium #11 contract had over the equivalent ethanol price over the last 12-18 months (see graphic).
However, with the crop 75% harvested, the output ratio is currently around 48% crystal vs ethanol. This small change in production percentage results in millions of tonnes less sugar produced.
Added to this revision is the ongoing dryness affecting yield and the anticipated early finish of the Brazilian crush. Throw in typhoon Yagi through the cane fields in China and a speculative community short the market - a price kick was in the making. The difference with this rally was that it met with less trade selling. For now, we will need to keep an eye on the fortnightly UNICA reports that update Brazilian production.
The rally in #11 had some of the shine taken off our sugar price by an increase in the AUD to 69c. Nevertheless, there was significant amount of forward pricing done for the 2024 and 2025 season with growers happy to average up their pricing as the crushing season passes 50% in Australia. The outlook suggests we may be in for a period of increased volatility based on macro events buffeting commodity prices and currencies.
For those who are feeling a bit fatigued by the wild swings in the market, keep an ear out for a new product we will be launching soon to assist you with managing your GEI price exposure.
Remember you have a choice of marketers, or you can split your nomination. You are not locked into your current marketer until after 31 October each year. If you’d like to learn more about our pricing and payment options, please contact a member of our Grower Marketing team.

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