London — The London No 5 front month October sugar futures contract was testing the $300/mt mark this week for the first time in nearly a decade. It was assessed at $303.30/mt Wednesday, down 18.1% on the year and down 43.5% since August 22, 2016. The London No 5 front month contract has not fallen below $300/mt since December 2008.
Parallel to this downward movement, European export prices have also been suffering. S&P Global Platts Containers EU 45 was assessed at $313.30 Wednesday, an all-time low since this assessment started in March 2013, as the bearish market drivers of both global and European sugar remain.
The very hot, dry weather in Europe throughout late June and July was seen to have provided some support to the sugar bulls, and initial crop tests have provided evidence sugar yields will be down year on year. But more normal weather conditions have returned recently in Europe and many believe these milder temperatures have come early enough to let the crop recover somewhat.
Yields, even with the drought, are still forecast to be at least in line with five-year averages, ensuring the 2018-19 season is another surplus year, given an increase in planted area. This is coupled with an estimated record harvest expected from India, where estimates for the 2018-19 (October-September) season are forecast at around 34 million mt. Such substantial world production increases downward pressure on global prices.
European stock levels, up 3.885 million mt year on year at the end of May, according to the European Commission, also continue to weigh down on the price level. Sugar is readily available and "Market operators will be keen to shift this available sugar before the new crop harvest," one Paris-based market source said.
The fundamentals continue to weaken, and many market sources suggest it is only a matter of time before the front month slips under $300/mt. "A race to the bottom," one Swiss trader said this week.