Mumbai, 2 August (Commoditiescontrol) Outlook for global sugar market appears to remain firm this week amid anticipation of deteriorating weather condition in Brazil and contentious long built up by the managed money, said a trade analyst.
ICE raw sugar futures edged lower as reduced frost risks in Brazil sparked massive long liquidation in sugar futures. The most active October contract closed with loss of 26 points at 17.91 cents per lb. The March contract settled lower by 16 points at 18.43 cents per lb last trading session on Friday.
"Prices slid lower on a profit taking and a view that the cold weather predicted for Brazil maybe not as cold as feared," said a sugar broker.
According to World Weather, there is still the risk of additional frost damage next week in Brazil.
As per the CFTC weekly report, ICE raw sugar managed money was 232,527 contracts net long on 27th July; up 31,658 contracts from the previous week. Long side positions increased by 27,315 contracts, while short side positions witnessed a fall of 4,343 contracts. Trade increased their long side position by 5,658 contracts and short increased by 39,492 contracts. The open interest for the week was registered at 1,139,810 vs 1,075,686 contracts last week.
Bullish Factors
Managed money and Speculators continue to increase their long postion indicating more upside remains in the market.
Unica reported on Tuesday that Brazil’s Center-South sugar output fell 2.84 percent y/y in the first half of July to 2.944 MMT.
There is still the risk of additional frost damage next week in Brazil, according to World Weather Information Service.
According to the International Sugar Organization (ISO), World sugar production in 2020/21 (Oct/Sep) will fall -0.2 percent y/y to 169.2 MMT after falling -8.4 percent in 2019/20 to 169.6 MMT. The world sugar deficit in 2020/21 will widen to a -3.1 MMT deficit from a +900,000 MT surplus in 2019/20.
Bearish Factors
Sugar prices on Thursday rallied to a near 5-month high on fears that another frost could further damage Brazil's sugar cane crops. An easing of frost risks in Brazil sparked massive long liquidation in sugar futures on Friday. Patchy frost reached about 80% of Minas Gerais Thursday night and caused limited damage to Brazil's sugar crops, according to World Weather.
The outlook for ample sugar production from India is negative for sugar prices after India's Sugar Mills Association on July 14 said it projects India 2021/22 sugar production at 31 MMT, up slightly from 30.9 MMT expected in 2020/21. India is the world's second-largest sugar producer.
Outlook for current week remains firm on back if deteriorating weather condition in Brazil and contentious long built up by the managed money.Market may continue to remain firm until Indian selling comes in at higher level may be near 20 cents per lb.Immediate support and resistance for Sugar #11 lies at 17.40 and 18.70 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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