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Weekly: ICE raw sugar futures closed with mixed session

22 Nov 2021 8:50 am
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Mumbai (Commoditiescontrol): ICE raw sugar futures closed with mixed session this week. The most active March raw sugar contract settled lower by 0.02 cents at 19.99 cents per lb, while the March white sugar contract settled higher $0.5 at $ 516.60 last trading session on Friday.

The sugar market was high this week on global supply concerns. However, the gains were restricted on signs of a smaller global sugar deficit, weakness in crude oil prices and Brazilian Real.

"Sugar prices have risen further as reduced sugarcane supply in Brazil has been further compounded by increased cane diversion to ethanol, while global demand for sugar trends upwards," Fitch Solutions said.

Thailand's sugarcane production is expected to rise by nearly a third this season, bouncing back from decade-low levels hit last year due to drought.

Global sugar supplies are tightening further with a fourth successive global deficit forecast for the 2022/23 marketing year, Tropical Research Services (TRS) said in a report.

The International Sugar Organization, in a quarterly update, said the pandemic had changed perceptions around holding stocks of the sweetener.

"The desirability of holding stocks is proving strong and will likely be a key driver for the remainder of the current 2021/22 cycle," the ISO said.

As per the CFTC weekly report, ICE raw sugar managed money was 202,875 contracts net long on 16
th November; up 21,061 contracts from the previous week. Long side positions increased by 16,082 contracts, and short side positions witnessed a fall of 4,979 contracts. Trade was 227,017 contracts net short. Long side position decreased by 1,689 contracts while short increased by 10,313 contracts. The open interest for the week was registered at 1,074,429 vs 1,076,071 contracts last week.

Bullish Factors

Sugar has underlying support from the recent damage to Brazil's sugar crops from frost and drought.

On Thursday, rallied to a 4-3/4 year nearest-futures high on signs of a smaller global sugar deficit after the International Sugar Organization (ISO) projected a global 2021/22 sugar deficit of -2.55 MMT, a smaller deficit than an August forecast of -3.58 MMT.

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.

Bearish Factors

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

Weakness in the Brazilian real against the dollar is a negative factor for sugar prices. A weaker real encourages export selling by Brazil's sugar producers.

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

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.

Recovery in sugar demand appears to be mixed as one hand most of the global are opening up which is likely to lead to recovery in demand for sugar on the other hand news of fourth wave of Covid and lockdown in Austria and Germany may restrict the pace of recovery in sugar demand. In near term sugar price are likely to follow crude oil prices.Immediate support and resistance for Sugar #11 lies at 19.66 and 20.46cents per lb, respectively.

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

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