The ISO currently expects a further 2.017 million tonnes, raw value, to be added to world sugar stocks by the end of the current sugar year i.e. Sept. 30, 2014 and export availability still to exceed import demand by 2.410 million tonnes.
“If our current import projections are validated by the end of this season, the unsold sugar will be added to opening stocks next season,” ISO said. “Hence, in October 2014, world stocks could be as high as 80 million tonnes or more than 45 percent of annual global sugar use.”
However, based on possible changes in production and projected consumption growth the organisation indicated “a neatly balanced global supply and demand coming into view [in 2014-2015], heralding the end of the surplus phase in the world sugar cycle”.
However, ISO warned that any price recovery on the back of a ‘no stock change’ scenario in the next season might be muted by the huge stocks accumulated since the beginning of the surplus phase in 2011-2012.
Before the rally to four-month highs of 18.47 cents a pound in April at the peak of the concerns about Brazil’s drought-related crop damage , raw sugar was trading at 3⅟2 year lows in January in a market weighed down by the huge global surpluses of the sweetener. The most-active contract on ICE – then March – recorded its lowest settlement since early June 2010 on Jan. 22 at 15.03 cents a pound.
Arabica coffee futures continued to retreat from the 26-month high of $2.1892 a pound reached on April 23 on worries that top grower and exporter Brazil’s 2014-2015 (April 1-March 31) output would be badly affected by the extreme hot, dry weather conditions that the country’s main southern coffee-growing areas, especially Minas Gerais and São Paulo, suffered in January and February.
Talk that the extent of the drought-damage to the country’s 2014-2015 crop may not be as great as feared pressured futures prices in recent days. Benchmark arabica for July delivery on ICE Futures U.S. on May 12 slipped to $1.8280 a pound, the weakest since April 4, before settling at $1.8943. At midweek, July arabica closed at $1.8523 a pound, marginally up May 9’s finish of 1.8465.
The U.S. Department of Agriculture’s (USDA) Brasilia bureau on May 12 released its first forecast of Brazil’s coffee production for the 2014-2015 marketing year (July 1-June 30), pegging output at 49.5 million 60-kg bags, a 7.8 percent or 4.2 million bags-decline on the prior year. Of this total, the USDA bureau projected the arabica crop at 33.1 million bags, down 6.3 million compared to its revised figure for 2013-2014 of 39.4 million bags. However, the USDA bureau said it was “unclear” to predict to what extent the prolonged drought and high temperatures in January and February will affect the final size of the crop and a more precise number will be available only after the harvest. Brazil’s arabica harvest should begin in May/June.
The Brazilian government’s crop bureau, Conab, also reduced its estimate for the country’s 2014-2015 coffee crop. Conab said May 15 Brazil probably will harvest 44.6 million bags. This compares to a range of 46.5 million to 50.2 million bags forecast by the crop bureau in January.
Other forecasts to date have been lower. Volcafe, the Switzerland-based coffee division of commodities group ED&F Man, for example, in its first projection on Brazil’s output for the 2014-2015 crop year (April 1-March 30), estimated production at 45.5 million 60-kg bags, down 10 percent from its previous projection of 50.7 million.
Meanwhile, ICE cotton futures were also weaker after the USDA forecast higher production, lower demand and rising global stocks for 2014-2015. The most-active July cotton contract on ICE Futures U.S. fell to a one-month low of 90.50 cents a pound on May 12 before settling at 91.30 cents, down 1.06 cents on last week’s close. By midweek, July cotton settled lower at 90.70 cents a pound.
USDA in its latest Wasde report, released May 9, said it forecast U.S. production at 14.5 million 480-pound bales in 2014-2015, up from the estimated 12.91 million bales in 2013-2014. It expects U.S. ending stocks to rise to 3.9 million bales, from 2.80 million bales in the current crop year.
The government department’s global outlook was downbeat, projecting world cotton ending stocks to rise to 101.66 million bales, up from an estimated 97.91 million bales for the current 2013-2014 season. It warned that China’s imports are expected to fall about one-third in 2014-2015 as the country’s government is likely to restrict imports in favor of consumption of domestic cotton as part of its overhaul of its stockpiling program for the fiber. According to the USDA, China’s beginning inventories are expected to reach nearly 60 million bales, more than 60 percent of total world stocks.
While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author can accept no responsibility for any errors or any consequence arising from the information provided.
