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ICE Raw Sugar Settled Lower On Weak Real, Strong Crude Oil Limits Loss

16 May 2020 8:53 am
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Mumbai (Commodities Control) - Sugar prices on Friday settled mixed with London sugar at a 2-1/4 month high. Weakness in the Brazilian real against the dollar on Friday undercut NY sugar, while strength in crude oil and weakness in the British pound gave London sugar prices a lift.

July NY world sugar #11 on Friday closed down 0.08 cents or 0.76% at 10.38 cents per lb. August London white sugar #5 closed up 4.00 or 1.13%.

NY sugar fell back from a 1-week high Friday and turned lower on weakness in the Brazilian real against the dollar. The Real on Friday fell 0.37% but remained above Thursday's record low of 5.970 reals/USD. The weakness in the real is bearish for sugar since it encourages export selling by Brazil's sugar producers.

WTI crude oil on Friday rallied more than 6% to a 6-week high, which benefits ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar production, thus curbing sugar supplies.

London sugar extended its gains Friday after GBP/USD tumbled to a 1-1/2 month low. Weakness in the British pound boosts the price of sugar that is priced in terms of sterling.

Sugar prices still have carry-over support from Wednesday when the CEO of Brazil's Santos port, Brazil's biggest port, said that port workers are starting to fall ill from the spread of the coronavirus, which may lead to restricted operations at the port and disruption of sugar exports.

In a bearish factor, however, Unica on Tuesday reported that Brazil's Center-South sugar production in the second half of April surged 93% y/y to 2.016 MT, with the percentage of cane used for sugar climbing to 45.76% in 2020/21 from 30.87% in 2019/20. Unica on Tuesday also reported that Brazil's sugarcane-based ethanol sales in April tumbled 32 y/y to 1.78 bln liters.

Another negative factor for sugar prices was last Tuesday's forecast from Conab, Brazil's official government forecasting agency, that Brazil's 2020/21 sugar production will climb 18.5% y/y to 35.3 MMT as millers divert more cane juice to produce sugar as the outlook for ethanol has been decimated by the drop in consumption and prices. Conab projects Brazil's mills will divert 42.4% of cane juice to produce sugar in 2020/21, up from 34.9% in 2019/20.

Sugar prices continue to be undercut by concern about weaker sugar demand due to the coronavirus pandemic. Researcher Czarnikow on Thursday projected that global sugar consumption will fall 1% this season, the first decline in 40 years, because of lockdowns to stem the spread of the coronavirus. Marex Spectron on Tuesday said it expects 2020/21 global sugar consumption to fall by 2-5 MMT (1%-3%) due to the negative effects of Covid-19.

Sugar prices have support from reduced sugar production in India after the Indian Sugar Mills Association (ISMA) reported last Friday that India Oct-Apr sugar output fell 20% y/y to 25.8 MMT.

Support and Resistance for sugar #11 lies at 10.06 cents and 10.84 cents per lb, respectively.

(Commodities Control Bureau)

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