Mumbai (Commodities Control) – ICE March raw sugar rose 0.1 cents, or 0.7%, to 13.54 cents per lb. Sugar was seen consolidating over the week, after climbing to a peak of 13.67 cents on Dec. 13, the highest level for the front month in more than one year. March white sugar climbed $1.30, or 0.4%, to $360.40 a tonne, having hit its highest since October last year at $362.
Sugar prices moved higher Friday with NY sugar at a 1-week high and London sugar climbing to a 13-3/4 month high on the prospects for tighter future sugar supplies.
Conab last Thursday cut its Brazil 2019/20 sugar production estimate by -5.3% to 30.1 MMT from an Aug estimate of 31.8 MMT.
Unica, last Friday, reported Brazil Center-South sugar production in the first half of December plunged -92.4% YoY to 33,000 MT versus 432,000 MT in the same period last year.
Rabobank on Dec 16 raised its global 2019/20 sugar deficit estimate to -8.2 MMT, 3 MMT more than a Sep estimate and a 4-year low.
Sugar prices also found support today on strength in the Brazilian real which climbed to a 1-1/2 month high against the dollar. A stronger real discourages export selling from Brazil's sugar producers.
Stronger crude oil prices are also positive for sugar prices as crude oil rallied to a 3-1/4 month high Friday before falling back. Strength in crude oil benefits ethanol prices and may prompt Brazil's sugar mills to divert cane crushing toward ethanol production rather than sugar production, thus curbing sugar production.
An extreme long position by funds is a potential bearish factor for London sugar prices after last Friday's weekly Commitment of Traders (COT) data showed that funds boosted their net-long London sugar positions by +1,181 contracts in the week ended Dec 24 to a 1-year high of 10,867 contracts. The huge long position could provide the fuel for long liquidation pressure.
Sugar prices were supported by last Wednesday's news from the Indian Sugar Mills Association (ISMA) that India's sugar production during Oct 1-Dec 15 fell 35% YoY to 4.58 MMT. ISMA on Nov 5 projected that India 2019/20 sugar production will fall 19% YoY to 26.85 MMT. India is the world's second largest sugar producer.
Sugar prices have been strong over the past two months on the outlook for smaller global sugar supplies. The USDA in the Dec 10 WASDE report cut its U.S. 2019/20 sugar production estimate by -3.8% to 8.28 NMT from Nov's estimate of 8.61 MMT.
Unica last Tuesday reported that Brazil's Center-South sugar production in the second-half of Nov tumbled 36.7% YoY to 337,000 MT, although total Brazil Center-South 2019/20 sugar output through Nov was mildly higher by 2.22% YoY at 26.409 MMT.
Big Picture Sugar Market Factors: World sugar production in 2019/20 (Apr/Mar) will fall 2.3% YoY to 172 MMT, after the +0.6% y/y rise to a record 185.2 MMT in 2018/19 (ISO). The world sugar balance in 2019/20 will tighten to a -6.1 MMT deficit from the +1.7 MMT surpluses seen in 2018/19 (ISO).
Sugar production by Brazil, the world's largest sugar producer, in 2019/20 will climb by +17.4% YoY to 34.1 MMT, after production in 2018/19 (Apr/Mar) fell -17.2% y/y to an 11-year low of 31.4 MMT (Conab).
Sugar production by India, the world's second largest sugar producer, in 2019/20 will fall 15% YoY to a 3-year low of 28 MT due to drought and a delayed monsoon season (India's National Federation of Cooperative Sugar Factories Ltd).
However experts are wary of a sugar glut for the new season. Higher output will boost sugar inventories in India, potentially increasing overseas sales next year after what may be the biggest global shortage seen in four years in 2019-20. India aims to export 6 million tons of subsidized sugar this year to cut its huge stockpiles of about 14 million tons — enough to meet the country’s local demand for more than six months.
“Barring any weather catastrophe, the country will be a net exporter,” said Gurdev Gill, vice president for agriculture trading at Marex Spectron in London.
India suffered a setback this year as droughts and floods in some areas of the western region hurt cane crops. Sugar output may drop to a three-year low of 26.85 million tons in the year that began on Oct. 1, according to the Indian Sugar Mills Association. Production may even drop to 26 million tons if some cane juice and B-heavy molasses are diverted to ethanol, it said.
“Weather is unpredictable and it’s difficult to forecast prospects for the next season,” said Casper Burgering, a senior commodities economist at ABN Amro Bank NV in Amsterdam. “But I think the government is doing everything to keep up production.”
Indian Prime Minister Narendra Modi has launched a 60-billion-rupee ($842 million) plan to tackle water shortages, exhorting farmers to eschew water-guzzling crops such as sugar cane.
The Support and resistance for the active contract of Sugar #11 lies at 13.34 cents and 13.70 cents, respectively.
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