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Fund Buying Takes ICE Raw Sugar To New 2-Yr Peak; 15 cents In The Vicinity

23 Jan 2020 6:37 am
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Mumbai (Commodities Control)) – Raw sugar futures on ICE hit two-year highs on Wednesday as bullish technical signals prompted more fund buying, though good producer selling and signs the market may be getting overbought kept gains in check.

March raw sugar closed up 0.11 cents, or 0.79%, at 14.66 cents per lb, after setting a two-year high of 14.79 cents. March white sugar settled up $4.00, or 0.99%. The active contract earlier hit a 2-1/2 year high of $409.80.

The market has been buoyed by tightening supplies, with a global deficit widely forecast for the 2019/20 season, while harvests in both India and Thailand have been delayed.

Citigroup on Jan 10 raised its global 2019/20 sugar deficit estimate to 7.6 MMT from a previous estimate of 7.0 MMT as sugar crop risks persist in India and Thailand.

Also, the USDA in its WASDE report (released Jan 10) cut its U.S. 2019/20 sugar production estimate by -1.5% to 8.158 MMT from a Dec estimate of 8.280 MMT.

The upside, however, remains capped by the prospect that higher prices could encourage mills in Brazil to increase sugar production at the expense of ethanol.

A dealer noted that Brazilian millers are taking a keen selling interest further down the futures curve, which does not bode well for 2020/21.

Another negative for sugar is weakness in the Brazilian real which dropped to a 1-1/2 month low against the dollar on Tuesday. A weaker real encourages export selling by Brazil's sugar producers.

For now though, most dealers say funds are in buying mode and have plenty of ammunition to buy considerably more.

"The signs so far are good, and we expect 15 cents to be tested very soon. The producer selling out of Brazil has not absorbed further speculative short-covering/fresh buying," said Sucden Financial in a note.

Last Friday's Commitment of Traders (COT) data showed that funds boosted their net-long NY sugar positions by 64K contracts in the week ended Jan 14 to a 3-year high.

Support and resistance for sugar #11 lies at 14.40 cents and 14.92 cents, respectively.

(Commodities Control Bureau)

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