Mumbai (Commodities Control) – Sugar #11 marked a sweet closing for the last week of the year. For the truncated week ending 31st December, ICE raw sugar posted weekly gains of close to 4.5%. This is the second consecutive weekly gain for the sweetener.
NY Sugar settled 1.5% higher for the week ending 24th December. This was preceded by NY Sugar ending just 1 point higher for the week ended 18th December and a point lower for the week ended 11th December.
Raw-sugar futures are heading for the longest streak of monthly gains since 2006 as demand increases at a time of diminished supplies.
Key buyers Indonesia and China are ramping up imports of the sweetener, while a drought curbs prospects in top shipper Brazil and Thailand contends with a lower crop outlook.
Drier-than-normal conditions over Brazil’s center-south cane-growing areas are expected to result in a decline in the nation’s 2021-22 production, and the drop could be accentuated if there’s a big shift toward cane use in ethanol production.
Macroeconomic backdrop has been supportive with global equity markets extending recent gains.
On the last day of the year, raw sugar futures on ICE climbed to a five-week high on Thursday, boosted by tightening supplies and a weakening dollar. It is to be noted that unlike past week, raw sugar managed to end the week and the year past 15 cents per lb.
March raw sugar settled up 0.21 cents, or 1.4%, at 15.49 cents per lb, after touching a five-week high of 15.53 cents.March white sugar settled up $2.50, or 0.6%, at $420.90 a tonne. The contract was up 17.2% on the year.
Dealers said investors were re-establishing long positions after scaling them back for most of the month.
The CFTC data for the week will be released on 4th January, on account of Federal holiday on 1st january. According to the data released for the week ended 21st December, last week, the net longs continued to slide for the fifth week in a row. Net longs dropped to 190,796 contracts vs 198,423 contracts. This was the result of simultaneous drop on the long side and rise on the short side. The open interest was registered at 12,00,726 contracts vs 12,04, 634 contracts.
During the week positive news on the demand side led the northward rally as Indonesia reportedly issued new licenses for imports. The Indonesia Sugar Refiners Association said that it expects Indonesia, Southeast Asia's largest economy, to boost its sugar exports next year by 10% y/y to 3.3 MMT due to higher demand from the food and beverage industry.
The front month posted an annual gain of about 15.4%, with the International Sugar Organization forecasting a global deficit of 3.5 million tonnes in the 2020/21 season.
Last week, robust sugar demand from China is supportive for prices after China's General Administrations of Customs reported last Thursday that China's Nov sugar imports surged 114% y/y to 710,000 MT and Jan-Nov China sugar imports rose 37.3% y/y to 4.36 MMT.
Having said so, Strength in the Brazilian real against the dollar kept gains in sugar prices under check during the week.
Meanwhile, S&P Global Platts Analytics estimates for the 2020-21 season (October-September) pointed to a global sugar deficit of 579,000 mtrv. Eyes will be on Brazilian producers, who start processing the crop in April and reach the peak of production in August.
Support and resistance for Sugar #11 lies at 15.02 cents and 15.76 cents per lb, respectively.
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