THE INTERNATIONAL sugar trade posted one of the most remarkable price rallies in any soft commodity in recent years this week, with the price in certain futures categories rising by an incredible 11 per cent.
Prices on the flagship New York futures exchange surged 11pc for the March contract overnight Tuesday Australian time to sit at around $US13.72 a pound.
The more widely traded May contract also jumped 9pc.
The price gains left sugar industry analysts scratching their head.
In his daily newsletter, Commonwealth Bank analyst Tobin Gorey suggested the rally may have been based more on speculation than hard data.
He said applications to import more sugar into the US and issues in Argentina were both thrown up as possible fundamental causes of the problem, but no news officially released had the scope to move the market so significantly.
“This might simply have been a Chinese whisper that was in the right place at right time,” Mr Gorey said.
Website Agrimoney had a similar take on the situation, saying the industry was searching for a key driver in the rise.
However, there are positive themes emerging in the sugar market.
Mr Gorey noted a tightening spread between the March and May futures contracts, while Agrimoney also suggested traders covering shorts as another possible technical issue supportive of prices.
On the fundamental front, the International Sugar Organisation (ISO) published an updated, and significantly larger, estimated deficit for the 2015 (Oct‑Sep) sugar year.
There are also reports of issues with supply out of Europe.
Meanwhile, Australian producers will not necessarily have masses of sugar cane to sell to take advantage of a price rise, following a drier than average 2015 and start to this year.
Figures from the Bureau of Meteorology show rainfall figures through sugar’s Australian heartland along the Queensland and northern New South Wales coast well below their annual January averages, following up from last year’s below average rainfall.
Canegrowers reported the 2015 season ended on January 4, 2016 with a total of 32.6 million tonnes of cane harvested in Queensland.
Canegrowers chairman Paul Schembri said it was wonderful outcome and a tribute to the skills of the farmers in the industry given the central and northern growing districts finished the year with rainfall deficits.
“Up and down the coast growers are watching the sky daily for storm clouds and hoping that this season delivers timely rain,” Mr Schembri said.
“With the right weather, 2016 could surpass last year’s harvest total."