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Weekly: ICE raw sugar futures scaled lower amid weakness in crude oil, the outlook for ample global supplies

31 Jan 2022 8:04 am
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Mumbai (Commoditiescontrol): ICE raw sugar futures scaled lower this week weakness in crude oil prices and the outlook for ample global supplies.

The most active March raw sugar contract settled lower by 0.7 cents at 18.20 cents per lb, while the March white sugar contract settled lower $10.2 at $ 495.20 last trading session on Friday.

Dealers said rains forecast for the weekend in Center-South Brazil could help improve soil moisture levels and the outlook for this year's cane crop.

An improving outlook for production in India has also contributed to recent market weakness.

Technical indicators have become more bearish after the market's recent weak performance, adding to selling pressure.

As per the CFTC weekly report, ICE raw sugar managed money was 94,299 contracts net long on 25th January; up 18,483 contracts from the previous week. Long side positions increased by 3,273 contracts, while short side positions witnessed a fall of 15,210 contracts. Trade was 122,319 contracts net short; up 24,758 contracts from the previous week. Long side position decreased by 10,004 contracts while short increased by 14,753 contracts. The open interest for the week was registered at 1,023,309 vs 1,035,833 contracts last week.

Bullish Factors

Reduced sugar output in Brazil is bullish for prices after Unica reported on Jan 12 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

Sugar prices are under pressure on expectations that bigger sugar crops in India and Thailand will offset sugar production losses in Brazil. The All India Sugar Trade Association on Thursday projected India 2021/22 sugar production would climb 2.9 percent y/y to 31.9 MMT.

The Thailand Office of the Cane & Sugar Board reported Jan 10 that Thailand 2021/22 sugar production during Dec 7-Jan 6 rose 58 percent y/y to 1.9 MMT. 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 Jan 3 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.

Immediate support and resistance for Sugar #11 lies at 17.85 and 18.67 cents per lb, respectively.

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

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