Mumbai (Commodities Control) – Sugar #11 shot up 5% this week, zooming past 14 Cents mark, on the back of continuous speculative buying, weather concerns in producing regions in the World.
On the charts, for the week-ended 6th October, speculators continued to raise their net long position in raw sugar on ICE futures by 9,964 contracts for a total net long of 212,687 contracts. It is interesting to note that net longs shot up for the third straight week. Having said so, while 11,677 contracts were added to the long side to 239,184, short side upped by 1713. Open interest was registered at 10,92,191, down 8,588 contracts.
Raw sugar futures rose for the ninth session on Friday, closing near a seven-month top on improved outlook for the 2020-21 season. March raw sugar settled up 0.06 cent, or 0.4%, at 14.23 cents per lb, just shy of a more than seven-month intraday top of 14.24 cents touched on Thursday, while December white sugar settled down $0.90, or 0.2%, at $384.90 a tonne.
Since early this week, ICE raw sugar active futures has been additionally supported by upbeat sentiments in financial markets, along with rally in crude oil prices and firmness in Brazilian currency.
It is interesting to note that raw sugar futures rose above 14 cents per pound for the first time since March on Wednesday, disregarding jitters in wider financial markets and supported by worries over adverse weather in several producing regions. On Wednesday, March raw sugar settled up 0.26 cent, or 1.9%, at 14.14 cents per lb, the highest since March 2.
Lower sugar production in Thailand, Russia and the European Union, coupled with an expected demand recovery, will result in a deficit of 2.2 million tonnes of sugar in the 2020-21 season, broker and analyst StoneX said.
Highlights from a report issued by USDA attache in Bangkok reveals that Thailand's sugarcane production in the marketing year (MY) 2020/21 is forecast to decrease by 2.6 percent from MY 2019/20 to 73.9 million metric tonnes (MMT). As a result, sugar production is forecast to decline to 7.85 MMT, down 5 percent from 8.3 MMT in MY 2019/20.
Dry weather in top exporter Brazil is also supporting prices. Industry group Unica reported on Friday signs of falling yields for cane. Unica said the excessive dry climate has started to hurt agricultural yields. Based on data from 90 mills in September, Unica said average yield was 71.97 tonnes of cane per hectare, 1.4% less than seen a year earlier.
Sugar group Tereos said on Friday it was recommending its French farmer members plant the same area of sugar beet in 2021 as this year.
In its monthly supply and demand report, the USDA increased projections for sugar consumption in the U.S. in 2020-21 by 50,000 short tonnes to 12.34 million short tonnes. It has also increased its projection for sugar consumption in the previous season by 55,000 short tonnes to 12.34 million short tonnes. With the changes, the United States is seen using more sugar in 2019-20 and in 2020-21 than it did in 2018-19, despite the coronavirus pandemic.
Sugar prices also garnered support after China on Friday raised its 2019/20 sugar import estimate. According to the China Agricultural Supply and Demand Estimates (CASDE), China will import 3.5 MMT of sugar in 2019/20, up 15% from a prior estimate of 3.04 MMT.
Meanwhile, Sugar production and ethanol exports increased sharply in Brazil in September as mills enter the final weeks of the current season, industry group Unica said on Friday.
Brazil's center-south sugar output reached 2.86 million tonnes in the second half of September, 59% more than in the same period a year earlier, as mills sharply favor the sweetener in their production strategies at the expense of ethanol.
Not to forget, the market is eyeing speculators' actions closely. The large long position held by funds could lead to downward corrections, dealers said.
"The path of least resistance remains to higher prices for now. We would caution though that the reversal from those highs is potentially nasty," Commonwealth Bank of Australia analyst Tobin Gorey said, adding that funds may soon reach their risk capacity limit and stop buying.
Meanwhile in India, sugar prices slipped Rs. 10 per quintal further in Eastern and Southern sugar markets in absence of demand and selling pressure, on Saturday. However, stability was noted in other markets where traders and millers were expecting better demand from next week.
Sugar prices came down to rock bottom; inching lower on a daily basis for the last one and half months. Mills’ rates have slipped below Minimum Selling Price (MSP) in many states including Maharashtra, Bihar, Karnataka and other states. UP based Mills’ selling rates also came down to MSP of Rs. 3100 per quintal. The government had fixed MSP to save the industry from mutual competition.
Another update from Indian sugar sector--Uttar Pradesh sugar mills, according to the state Govt., are allowed to operate from 25th October, while the SAP may be looked into later. Cane growers of Uttar Pradesh, the largest sugar producer of the country, have demanded for the State Advised Price (SAP) to be upped from Rs 325 to Rs 450 per Quintal. However, any decision of SAP is most unlikely before mid-November. The new sugar season kick started this month.
Support and Resistance for Sugar #11 lies at 14.07 cents and 14.35 cents per lb, respectively.
(Commodities Control Bureau)
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