Jenkins Sugar Group Post-Close Commentary

Friday, March 9, 2012


Good Afternoon,


The open interest declined by 4,958 lots.


Datagro states that the average age of the Brazilian center south cane crop was 3.8 years in 2011 against a normal of 2.7 years. This indicates the 2012/13 cane crop will likely not see improved yields, which could apply for some years before the age of the cane is reduced by replanting. They add that the crop needs rain at the moment as February was very dry although there are reports that the rainfall from September to February was close to the 17 year average and the vegetative maps show the cane in similar condition to last year. Brazilian cane growers stated that the 2012/13 crop may not be able to make the anticipated 4-5% growth.


At the last two auctions in China the government has only bought small quantities and at the last auction paid CNY 6,750 per tonne, above their original target of CNY 6,550 per tonne. They have now purchased 268,000 tonnes of the 500,000 tonnes planned but millers are not keen to sell to the government as they forecast that once they are over their present peak stock situation that domestic sugar prices will rise. Chinese domestic sugar production in January/February was 6.0 million tonnes, 10.8% higher than last year assisted by February production begin 32% higher at 3.3 million tonnes.


The Indian government has now granted 86,039 tonnes of export permits from the second tranche of 1.0 million tonnes of exports. The Maharashtra Meteorological Institute report that recent monsoon rain has fallen less often but when it does fall it is more intensley and this stresses the cane crop due to these conditions causing heat stress and attracting disease.


Pakistani Millers suggest that sugar exports should not take place until after the crop has been completed as they are worried that it has been affected by the prolonged winter and frost, causing the Ministry of Industries to suggest they consider importing sugar.


Thai millers are suggesting that the domestic sugar price is floated prior to their joining ASEAN to discourage sugar smuggling to other countries in the block where the sugar price is higher than in Thailand.