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Weekly: Robust Speculative Buying Drives ICE Raw Sugar To 2-Yr Peak; Experts See Extended Shopping Spree

19 Jan 2020 6:58 pm
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Mumbai (Commodities Control) - ICE Raw sugar edged towards the two-year peak, primarily, on the back of technical buying and tightening global supplies. As per the latest CFTC data, the net of the longs and shorts for the week ended 14th January stood over 77,000 contracts, up 500 percent from the previous week. Clearly, indicating speculators massive shopping in sugar futures.

March raw sugar settled up 0.1%, or 2 cents, to $14.45 cents per lb on Friday, having hit a two-year high of 14.58 cents on Thursday. The contract was up 2.7% on the week. March white sugar settled up 0.1%, or $0.50, to $395.10 per tonne, after touching a two-year high of $401.70 on Thursday.

The same fundamentals news flow has been sweetening sugar prices week-on-week. Monday’s session closed with raw sugar futures hitting a 14.5 months high, in response to Citi Group raising its global sugar deficit forecast from previous estimate of 7.0 MMT to 7.6 MMT, in its report dated 10th January, as sugar crop risks persist in India and Thailand. India's Sugar Mills Association showed India sugar production from Oct 1-Jan 15 dropped 26% y/y to 10.89 MMT. Even USDA cut its U.S. 2019/20 sugar production estimate by -1.5% to 8.158 MMT from a Dec estimate of 8.280 MMT.

Technical buying along with slowing sugar output from Brazil and lower output from Mexico, U.S, and the EU continued to support sugar prices through Tuesday and Wednesday, as market settled at 14.32 cents and 14.52 cents, respectively. Unica on Tuesday reported that Brazil's Center-South sugar production in the second half of December plunged 82.4% y/y to 13,000 MT versus 73,000 MT in the same period last year, although 2019/20 Center-South sugar production through Dec is up 0.53% y/y at 26.481 MMT.

Recent data from Conab was supportive for sugar prices since it suggested tighter future sugar supplies. Conab on Dec 19 cut its Brazil 2019/20 sugar production estimate by 5.3% to 30.1 MMT from an Aug estimate of 31.8 MMT.

The Thai Sugar Millers Corp. is forecasting sugar production in Thailand will be less than 12 MMT this year, down more than 14% y/y from 14 MMT last year because of drought and low rainfall in Thailand's sugar-growing areas.

It wasn’t until Thursday that sugar prices took a breather on technical correction and weak Brazilian Real. Weakness in Real kept sugar prices from moving sharply ahead. The currency fell to a 6-week low against the dollar on Thursday. A weaker real encourages export selling by Brazil's sugar producers.

Analysts have been widening their sugar deficit forecasts for 2019/20, though there is a risk high prices could eventually prompt India to export its large surplus stocks and tempt Brazilian mills to produce more sugar at the expense of ethanol.

Brazilian mills will post an all-time low production mix for sugar this season with only 34% of the cane used to produce the sweetener with the rest going to ethanol as demand and prices for the biofuel have increased.

Experts are of the opinion that in the short term the market remains positive, with dealers largely viewing dips as buying opportunities.

Speculators swung to a long position in sugar futures and options, according to government data released on Friday. Sugar speculators added 33,151 contracts to a net long position in the week to Jan. 14, while they reduced short position by 30,855 contracts resulting in addition of 64,006 contracts in their net long position which stood at 77076 contracts as per CFTC report. The Open interest added by 1,42,002 contracts to 13,24,060.

Support and Resistance for Sugar#11 lies at 14.27 cents and 14.59 cents per lb, respectively.

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