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ICE Raw Sugar Settles Lower after Hitting 5 – Months High

8 Aug 2020 8:24 am
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Mumbai (Commodities Control) – Sugar prices on Friday posted moderate losses as NY sugar retreated from a 5-month high. A decline in crude oil prices on Friday, along with weakness in the Brazilian real against the dollar, has sparked long liquidation in sugar futures.

Crude oil fell more than 1% Friday, which undercuts ethanol prices and is negative for sugar as weakness in ethanol may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol production, thus boosting sugar supplies.

A rebound in the dollar stalled the recent run-up in sugar.

October raw sugar ​​settled down 0.27 cents, or 2.1%, at 12.67 cents per lb, after setting a five-month high of 13.00 cents earlier in the session. October white sugar ​​settled down $5.40, or 1.4%, at $372.30 a tonne.

Dealers said diminishing outlooks for production in Thailand and Mexico and strong demand from Asia may be creating a more supportive fundamental backdrop for the market.

"The rally is prompting some to re-assess sugar's fundamentals. And we think there are a few production issues that are rightly on the radar, not least the increasing likelihood that Thailand's production will again be well below capacity," Commonwealth Bank of Australia analyst Tobin Gorey said in a note.

The global 2020-21 (Oct-Sept) sugar supply balance is seen at a deficit of 1.3 million tonnes compared with a June estimate for a 0.5 million-tonne surplus, broker and consultancy StoneX said on Thursday.

Another negative factor for sugar prices is the weakness in the Brazilian real against the dollar. The real on Friday dropped 1.71% to a 3-week low against the dollar. A weaker real encourages export selling by Brazil's sugar producers.

Sugar prices have pushed higher over the past two weeks, with NY sugar climbing to a 5-month high earlier Friday on global sugar crop concerns. StoneX said Thursday that reduced sugar output in Thailand and Europe will push the global 2020/21 sugar market into a deficit of 1.3 MMT.

Support and Resistance for sugar #11 lies at 12.40 cents and 13.14 cents per lb, respectively.

(Commodities Control Bureau)

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