Mumbai (Commoditiescontrol): ICE raw sugar futures closed mixed this week. The most active March raw sugar contract settled higher by 0.07 cents at 19.93 cents per lb, while the most active December white sugar contract settled lower $0.5 at $ 504.30 last trading session on Friday.
Dealers said the market could move higher near term, with production continuing to disappoint in top producer Brazil. They also cited that the exports from India, a key producer, are tailing off as the internal market rallies.
European traders said that Pakistan has issued a new international tender to purchase 50,000 tonnes of white sugar after making no purchase in its previous tender for 200,000 tonnes.
As per the CFTC weekly report, ICE raw sugar managed money was 225,415 contracts net long on 21st September; down 2,476 contracts from the previous week. Long side positions decreased by 5,185 contracts, while short side positions witnessed a fall of 2,708 contracts. Trade decreased their long side position by 45,669 contracts and short declined by 20,560 contracts. The open interest for the week was registered at 1,101,439 vs 1,239,038 contracts last week.
Bullish Factors
Sugar prices have support from dry conditions in Brazil. Maxar on Monday forecasted limited rain chances this week in Brazil's sugar-growing areas with temperatures well above average.
Higher crude prices benefits ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanal production rather than sugar production, thus curbing sugar supplies.
The International Sugar Organization (ISO) on Aug 27 raised its global 2021/22 sugar deficit estimate to -3.83 MMT from a May estimate of -2.65 MMT after frost in July damaged Brazil's sugar crops.
On Aug 10, the CEO of Tereos SCA, the world's second-biggest sugar producer, said that his company's sugarcane crushing might fall 21 percent y/y in 2021/22 to 16.6 MMT, the lowest in 12 years. He said that the damage to Brazil's sugar crops from frost and drought might keep sugar prices elevated for as long as 18 months.
On Aug 3, Wilmar International said that frost and drought damage this year would cut Brazil's 2021/22 sugar production to 28 MMT, down 27 percent y/y and the lowest output in at least a decade. Wilmar also warned that Brazil's 2022/23 sugar cane crop might not recover due to this year's drought and frost that damaged cane plants.
Bearish Factors
The real fell 0.85 percent on Friday and is just above Monday's 1-month low. A weaker real encourages export selling by Brazil's sugar producers.
Data Sep 10 from Unica was negative for sugar as it showed Center-South Brazil 2021/22 sugar production the second half of Aug rose 0.7 percent y/y to 2.954 MMT.
On Sep 8, the Thailand Sugar Millers Corp forecast Thailand 2021/22 sugar production could climb 44 percent y/y to 11 MMT due to beneficial rain and increased plantings. Thailand is the world's second-largest sugar exporter.
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.
According to the International Sugar Organization (ISO), World sugar production in 2021/22 (Oct/Sep) will climb 0.18 percent y/y to 170.638 MMT from 170.335 MMT in 2020/21. The world sugar deficit in 2021/22 will widen to a 3.829 MMT deficit from a 1.453 MMT deficit in 2020/21.
Due to the gradual increase in crude oil demand prices of crude oil are likely to move up from current levels apart from this production loss in Brazil will be supportive for rise in sugar prices in the near term. Immediate support and resistance for Sugar #11 lies at 19.55 and 20.51 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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