Mumbai Commodities Control - Sugar #11 managed to end on the positive side of the scale for the week ended 2nd-October. Most active contract on ICE futures upped 0.3% during Sep 28- Oct 2. The sweetner extended the weekly strength from last week; although just a tad bit higher, on the back of weather concerns in Brazil and exports concerns from India, apart from the speculative buying.
During the week, Archer Consulting said the dry weather that's sparking fires in Brazil's sugar-cane growing regions could curb Brazil's 2020/21 sugar production by 2.8 MMT.
Even Maxar said that sugar-growing regions in Brazil have only received 5% to 25% of normal rain in the past few months, leaving crops "extremely dry." Sugar prices have support from concern a La Nina weather pattern could lead to excessive dryness in Brazil that cuts sugarcane yields.
Not to forget, the deliveries against the expiration of the October contract were seen at 51,599 lots, a record for any contract in the exchange, according to traders. Dealers diverged on the assessment of the delivery as to whether it was bearish or bullish for the market. As always, the large volume signals ample supplies, but the interest from traders to take delivery also indicates they have a destination for the product.
Sugar rallied Thursday morning sharply after some of the world's largest sugar traders took cash delivery on a record 51,797 Oct NY sugar futures contracts that expired on Wednesday. NY sugar hit 7-month nearest-futures high.
On the charts, for the week-ended 29th September, speculators continued to raise their net long position in raw sugar on ICE futures by 20,141 contracts for a total net long of 202,723 contracts. It is interesting to note that net longs shot up for the second straight week. This has happened due to simultaneous addition to long positions along with reduced shorts. Open interest was registered at 11,00,780, down 7,233 contracts.
On Friday, however, raw sugar closed flat-to-weak affected by a broad decline in commodity and other financial markets. March raw sugar settled down 0.03 cents, or 0.2%, at 13.55 cents per lb. December white sugar settled down $1.30, or 0.3%, at $373.70 a tonne.
Sugar prices on Friday gave up an early advance and closed lower on weakness in crude oil and a slide in the Brazilian real. Crude oil prices fell more than 4% on Friday to a 3-week low.
In fact weak crude oil prices along with dull Brazilian currency prevented NY sugar from rising and staying elevated throughout the week. ICE raw sugar slid from 5 -weeks high on Monday due to joint efforts of fund liquidation and weak Real!
Meanwhile, Brazil posted a significant increase in sugar exports in September, government trade body Secex said on Thursday. According to Secex, Brazil exported 3.62 million tonnes of sugar in September, up significantly from the 1.71 million tonnes from the same period a year before.
Last week, S&P Global Platts noted that the coronavirus pandemic is seen cutting global sugar consumption by 2.5 million tonnes in the 2019-20 season (Oct-Sept), helping to sharply reduce an expected supply deficit. The stay-at-home measures to fight the outbreak reduced sugar use globally. They also led to a fall in ethanol consumption and prices in Brazil that pushed mills in the largest producer to maximize sugar production, erasing a global deficit that was previously projected at nearly 7 million tonnes, it said. S&P Global Platts now sees the global sugar supply deficit in 2019-20 at a much smaller 260,000 tonnes, but it projects the deficit increasing in the new season (2020-21) to 1.14 million tonnes as it projects sugar consumption will recover and grow 1.5%.
Having said so, technical charts continue to be a robust support for raw sugar. Speculators increased their bullish bet in raw sugar futures to near 160,000 contracts, one of the largest long positions for the sweetener in the last 5 years.
Meanwhile for India, this was a truncated week due to holiday on Friday. On Saturday, Sugar prices came under pressure due to the delay in the government's decision on the sugar package. Uneasiness was visible in the market. Therefore, sugar prices fell up to Rs. 30 per quintal in Eastern, Southern and Western regions of the country. Few mills from Maharashtra and Southern states were forced to reduce mill rates, as they wanted to clear their stock. However, the prices were stable in Delhi and Uttar Pradesh.
Indian sugar markets continue to miss the festive vibe as the sugar demand, which is at its peak ahead of festive and wedding season, is clearly absent this year.
As per the latest kharif update by GoI, about 52.84 lakh ha area coverage under sugarcane has been reported compared to last year (51.89 lakh ha). Thus 0.95 lakh ha more area has been covered compared to last year. Higher area is reported from the States of Maharashtra (1.87 lakh ha), Uttar Pradesh (0.11 lakh ha), Karnataka (0.10 lakh ha), Chhattisgarh (0.01 lakh ha) and Punjab (0.01 lakh ha).
Support and resistance for sugar #11 lies at 13.35 cents and 13.72 cents per lb, respectively.
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