Rabobank currently projects a surplus of 8.9 million tonnes, raw value, for 2011/12, and a surplus of 6.6 million tonnes, raw value, for 2012/13.
Andy Duff, Rabobank Food & Agribusiness Research and Advisory analyst commented: "Given the changes in the outlook for individual countries in Q3—most notably in Brazil—our overall assessment of the global supply/demand balance points to a higher surplus for 2012/13 than our Q3 projection."
A strong finish to Centre/South Brazil's 2012/13 campaign is causing prices to test the lower limit of their recent range of 19 to 22 c/lb. Meanwhile, there continues to be discussion of an increase in Brazilian gasoline prices. The rationale for this may have more to do with improving the finances of Petrobras than with helping out the cane sector, but nevertheless, the effective increase in the ceiling price for hydrous ethanol that would result from an official gasoline price hike would be supportive for sugar.
Modest downward revisions to production forecasts in countries such as India, Thailand and Russia in recent weeks have been offset by upward revisions to projections for Brazil, Mexico and others. As a result of the projected surplus in 2012/13, the global stocks-to-consumption ratio for 2012/13 is forecast to be equal to its 10-year average level.
This quarter also saw the breaching of the ethanol floor by NY futures on 10 December, when sugar prices slipped below their anhydrous ethanol equivalent price.
Ethanol exports from Centre/South Brazil for Apr to Nov 2012 are 73 per cent above the previous years shipments, with the increase completely driven by higher (+300 per cent) anhydrous ethanol exports.
It remains to be seen to what extent the ethanol market could provide resistance to weakening sugar prices in the next two to three months given that the crop season in Centre/South Brazil will conclude this month.
