“World production and consumption for the next 2-3 years show a reasonable chance that we will continue having deficits” as prices remain below production costs for many producers, Archer Consulting says in March 12 report.

?Consumption around the world is rising faster than production, says Arnaldo Correa, partner at the Sao Paulo- based firm

As Brazil’s average sugar-yield (known as ATR) dwindles fourth year in row, “it’s no wonder that we will have constant deficits (though small) over the next years”

Thailand’s costs of production is 15.10c/lb, India’s 24.47c/lb, while Australia’s is 11.90c/lb and Brazil’s 11.25c/lb, Archer estimates

Near term, recent price rally needs validation from physical market, where demand came to a standstill since early March

NOTE: Raw sugar for May delivery rose 2% last wk to 15.13c/lb on ICE Futures U.S. in N.Y.

Rebounding Brazilian real helping sugar rally as it deters producer selling of commodities priced in greenback: Archer

Eoin Treacy's view

“The cure for high prices is high prices” is one of the oldest adages in the commodity markets but it also works in reverse and particularly for agricultural commodities where farmers can choose what to plant. As prices for one commodity fall they have an incentive to plant a more lucrative cash crop. 

Sugar prices trended lower for four years; giving up the majority of their bull market gains in the process. The August rally broke the progression of lower rally highs and signalled that the supply surfeit had been worked through. The backwardation in prices is also indicative of a near-term supply deficit suggesting the dynamics of the market have reversed over the last nine months. 

White sugar pulled back sharply in February but found support above the August low and has rallied impressively for three consecutive weeks to hit a new recovery high today. A short-term overbought condition is now evident so some consolidation of this impressive rebound is looking increasingly likely but a sustained move below the trend mean would be required to question medium-term recovery potential. 

Arabica coffee is also showing signs of increasing investor interest and pushed above the trend mean for the first time in 14 months today. A clear downward dynamic would be required to signal resistance in this area. 

Among grains and beans Soybeans has base formation characteristics as it tests the upper boundary near 900¢.