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Weekly: ICE raw sugar futures scaled higher amid strength in crude oil, the Brazilian real

17 Jan 2022 8:24 am
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Mumbai (Commoditiescontrol): ICE raw sugar futures scaled higher this week amid strength in crude oil and the Brazilian real.

The most active March raw sugar contract settled higher by 0.26 cents at 18.31 cents per lb, while the March white sugar contract settled higher $16.8 at $ 502.60 last trading session on Friday.

Suedzucker, Europe's largest sugar producer, confirmed a jump of about 90 percent in third-quarter operating profit as improved sugar market prices boosted earnings.

"With a further deficit in the 2021/22 marketing year, the world (sugar) market environment is expected to remain positive," Suedzucker said.

Dealers said the upside appeared limited, however, with improving production outlooks for Thailand and India likely to temper any bullish sentiment related to China.

Analyst Green Pool on Friday cut its forecast for China's sugar production in 2021/22 to less than 10 million tonnes and added that an elevated risk of frost because of the La Nina weather event made for further downside potential.

As per the CFTC weekly report, ICE raw sugar managed money was 76,523 contracts net long on 11
th January; down 61,616 contracts from the previous week. Long side positions decreased by 28,325 contracts, while short side positions witnessed a rise of 33,291 contracts. Trade was 98,107 contracts net short; down 56,378 contracts from the previous week. Long side position increased by 30,491 contracts while short decreased by 25,887 contracts. The open interest for the week was registered at 1,044,324 vs 1,023,556 contracts last week.

Bullish Factors

Strength in Brazilian real discourages export selling from Brazil's sugar producers.

High ethanol prices may cause cane mills in Brazil's top producer to shift production away from sugar and toward ethanol, a cane-based biofuel.

Reduced sugar output in Brazil is bullish for prices after Unica reported on Wednesday that 2021/22 Center-South sugar production through Dec was 32.029 MMT, down -16.14 percent y/y.


In addition, the sugar content in the sugarcane crushed fell -1.55 y/y to 142.92 kg/ton from 145.17 kg/ton a year earlier.


Weather concerns in Brazil are a major bullish factor for sugar prices, with Brazil having experienced its worst drought in 100 years and as several bouts of frost in Brazil have damaged some sugar cane crops.

Conab, on Nov 23, cut its Brazil 2021/22 sugar production estimate to 33.9 MMT from an Aug forecast of 36.9 MMT, down 17.9 percent y/y. Conab projects Brazil's 2021/22 sugarcane crushing will fall to 525 MMT, down -13 percent y/y and the lowest in 10 years.

The International Sugar Organization (ISO) recently projected a global 2021/22 sugar deficit of -2.55 MMT.


Bearish Factors

The Thailand Office of the Cane & Sugar Board reported on Monday that Thailand 2021/22 sugar production from Dec 7-Jan 6 of 1.9 MMT, up +58 percent y/y. Thailand is the world's second-largest sugar exporter.

Increased sugar production in India is negative for prices after the Indian Sugar Mills Association (ISMA) reported on last Monday that India's sugar production from Oct 1-Dec 31 rose +4.3 percent y/y to 11.56 MMT.

The Indian Sugar Mills Association (ISMA) said India currently has an opening balance of +8.18 MMT of sugar as of Oct 1 and needs to export about 6 MMT in 2021/22, although that would be 15 percent y/y less than 7.1 MMT in 2020/21.


As per the India Sugar Mills Association, sugar production from India, the world's second-largest sugar producer, will climb +13 percent y/y to 31 MMT in 2020/21 due to a good monsoon season."

According to the International Sugar Organization (ISO), World sugar production in 2021/22 (Oct/Sep) will climb +0.08 percent y/y to 170.47 MMT from 170.335 MMT in 2020/21.

All the major demand and supply factors are discounted in sugar prices so price movement will depend on crude oil prices and Brazilian real.
Immediate support and resistance for Sugar #11 lies at 17.90 and 18.58 cents per lb, respectively.

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


       
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