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Weekly: ICE raw sugar futures edge higher on expectations of tight supplies , strength in Brazilian real

14 Nov 2021 3:51 pm
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Mumbai (Commoditiescontrol): ICE raw sugar futures edged higher this week on expectations for supplies to remain tight, strength in Brazilian real.

The most active March raw sugar contract settled higher by 0.07 cents at 20.01 cents per lb, while the March white sugar contract settled higher $9.8 at $ 516.10 last trading session on Friday.

Dealers said sugar remains underpinned by India's plans to divert more sugarcane to ethanol production, as well as by concerns over global inflation.

Fitch Solutions said sugar prices will remain near current lofty spot levels heading into 2022, thanks to ethanol diversion, weather issues in top producer Brazil and a recovery in global demand.

Bullish Factors

Fitch Solutions boosted its 2021 sugar price forecast to 17.7 cents per lb from a July estimate of 16.5 cents per lb and cut its 2021 global sugar surplus estimate to +3.7 MMT from a July estimate of +8.5 MMT.

Brazil ethanol prices climbed to a record high, which may prompt Brazil's sugar mills to boost ethanol production at the expense of sugar production.

A rally in the Brazilian real against the dollar gives sugar prices a boost as the stronger real discourages export selling from Brazil's sugar producers.

Sugar prices had support on Wednesday when Rabobank said that Brazil is expected to face a sugarcane shortage next year, which will limit its capacity to increase exports. Rabobank also said the development of Brazil's sugarcane crop is very delayed as frost damages hampered planting and that limited supplies and high crude oil prices will help keep sugar prices high into next year.

Sugar also moved higher after the U.S. Climate Prediction Center said on Thursday that the La Nina weather pattern across the equatorial Pacific would likely increase in strength over the next three months. A stronger La Nina might lead to extended droughts in South America that reduce sugar production.

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.

CFTC commitment of traders is delayed due to the Veteran's Day holiday and will be published on Monday 15th November.

Bearish Factors

A negative factor for sugar is the outlook for higher Thailand sugar exports after Czarnikow projected Thailand 2021/22 sugar exports would surge +67% y/y to 6.7 MMT.

Weak crude prices undercut ethanol prices and are negative for sugar.

A bearish factor for sugar is the outlook for robust exports from India, the world's second-largest sugar producer. The Indian Sugar Mills Association said Oct 15 that it expects India to export 6 MMT of sugar in 2021/22, although that would be down 15 percent y/y from 7.1 MMT in 2020/21.

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.

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.

Markets should remain firm in near term due
to ethanol diversion, weather issues in top producer Brazil and a recovery in global demand.Immediate support and resistance for Sugar #11 lies at 19.78 and 20.28 cents per lb, respectively.

(By Commoditiescontrol Bureau: +91-22-40015505)

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