Mumbai (Commodities Control) – It was a flat closing for the second consecutive week for NY Sugar, as it ended just 1 point higher for the week ended 18th December. The most active contract on ICE futures touched the highest level of 14.76 cents, while not breaching the 14 cents level on the downside. Last week, the sweetener lost a point, as it closed flat, for the week ended 11th December.
On Friday, raw sugar futures closed down 1.6% on ICE, as the uncertainty about U.S. coronavirus relief legislation and a high global number of coronavirus cases weighed on sentiment.
March raw sugar closed down 1.6% to 14.44 cents per lb, only 1 cent above where the market started trading on Monday. March white sugar fell $5.10 to $398.30 a tonne.
Sugar futures did hit a one-week high of 14.76 cents earlier in the session on Friday, but negative macro news with the political uncertainty in the United States and rising COVID-19 cases had a negative impact later. Also forecasts for rain in Brazil eased concerns about dryness and may boost Brazil's sugarcane yields.
Sugar prices initially climbed during the early session of Friday after crude oil prices rallied to a 9-1/2 month high.
It is to be noted that NY Sugar started on a weak note this week, as sugar prices on Monday sank to 6-week lows on the outlook for abundant global sugar supplies. Early this month, Unica reported that Brazil's Center-South sugar production in the second half of November rose 22.6% y/y to 427,000 MT. The percentage of cane used for sugar rose to 35.55% in 2020/21 from 23.85% in 2019/20.
Some downside support came this week when the director of Unica said on Tuesday that Brazil 2021/22 sugar production will "definitely" be lower due to this year's drought.
But, announcement of Indian export subsidy, although delayed, weighed on the already bearish sentiment. The Indian government on Wednesday authorized spending Rs 3,600 Cr to help subsidize Indian sugar producers to export as much as 6 MMT in the 2020/21 season.
The outlook for more sugar supplies from India is bearish for sugar prices. The Indian Sugar Mills Association reported on Thursday that India's sugar production from Oct 1-Dec 15 jumped 61% y/y to 7.38 MMT.
While on Nov 19, the USDA's Foreign Agricultural Service (FAS) estimated that India's 2020/21 sugar production will climb 16.8 % y/y to 33.76 MMT.
Amidst all the negatives, strong crude oil and weak dollar were a few positive factors that cushioned sugar futures this week, helping them keep within a range.
Dealers said the market had priced in Indian news and was firmly range bound between 13.50 and 15.50 cents, though investor flows into commodities as a hedge against inflation was something to watch next year.
"Looking ahead to 2020/21, we anticipate a 0.3 million tonne deficit, as production increases are being offset by a 1.7% recovery in global consumption," said Rabobank in a note.
It is to be noted that sugar has been negatively impacted in recent sessions by liquidation of long positions by funds, which are dismantling a once massive bullish bet.
The CFTC report for the week ended 15th December reveals that the net longs have been sliding for the fourth week in a row. During the latest week net longs gave up 16,816 contracts to 198,423 contracts. This was the result of simultaneous drop on the long side and rise on the short side. The open interest fell to 12,04, 634 contracts vs 12,39,868 contracts in the past week.
Experts see NY sugar moving in a range for a while now. Anton Kolhanov of Kolhanov.com sees an uptrend starting as soon as the market rises above resistance level 15.20 cents, which will then be followed by a resistance level 16.50 and 18 cents.
Immediate support and resistance for Sugar #11 lies at 14.30 cents and 14.67 cents per lb, respectively.
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