Mumbai (Commoditiescontrol): ICE sugar futures edged lower this week amid weakness in crude oil and the Brazilian real. The sugar market also weighed down by increasing crop prospects in India and Pakistan, as well as macroeconomic factors.
The most active July raw sugar contract settled lower by 0.82 cents at 19.21 cents per lb, while the August white sugar contract settled lower $19.2 at $530.50 last trading session on Friday.
Dealers predict a slight worldwide sugar surplus in the current 2021/22 season due to higher-than-expected production in the Indian subcontinent.
Fund liquidation was highlighted by dealers as a reason for the risk-off trend, since the Federal Reserve is expected to follow up a half-percentage-point interest rate hike in May with two more rate hikes.
As per the USDA, Brazil's sugar production is expected to increase 2.9 percent to 36.37 million tonnes in the new season as crops rebound from adverse weather in the previous crop.
As per the CFTC weekly report, ICE sugar managed money was 236,227 contracts net long on 19th April; down 1,530 contracts from the previous week. Long side positions increased by 4,970 contracts, and short side positions witnessed a rise of 6,501 contracts. Trade was 270,528 contracts net short; up 10,043 contracts from the previous week. Long side position decreased by 16,582 contracts and short decreased by 6,539 contracts. The open interest for the week was registered at 1,039,651 vs 1,098,860 contracts last week.
Bullish Factors
Sugar prices have support on the outlook for Brazil's sugar mills to produce less sugar this month.
Covrig Analytics last Thursday said that Brazil's April sugar production could fall by 30 percent y/y to below 1.55 MMT as higher profitability of making ethanol compared to sugar prompts Brazil's sugar mills to divert as much as 70 percent of sugarcane to ethanol production.
Reduced sugar output in Brazil is bullish for prices after Unica reported Tuesday that 2021/22 Center-South sugar production Oct through Mar was 32.064 MMT, down 16.6 percent y/y.
In addition, the sugar content in the sugarcane crushed fell by 1.3 percent y/y to 142.88 kg/ton from 144.71 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.
Bearish Factors
Lower crude oil prices reduce ethanol prices and encourage sugar mills in Brazil to redirect more cane crushing to sugar production rather than ethanol, enhancing sugar supplies.
The Brazilian real tumbled against the dollar, which encourages export selling by Brazil's sugar producers.
The report from the USDA's FAS that projected Brazil 2022/23 sugar production would climb 2.9 percent y/y to 36.37 MMT and that 2022/23 Brazil sugar exports would increase by 3.7 percent y/y to 26.6 MMT.
Larger sugar crop sizes in India and Thailand will offset reduced sugar production in Brazil.
The Indian Sugar Mills Association (ISMA) raised its India's 2021/22 sugar production estimate to 35 MMT from 33.3 MMT, up 12.2 percent y/y, and said sugar exports would jump to a record 9 MMT. India is the world's second-largest sugar producer.
Also, the Thailand Office of the Cane & Sugar Board reported on March 22 that Thailand 2021/22 sugar production from Dec 7-Mar 19 was at 9.6 MMT, and the total Thailand 2021/222 sugar harvest Dec 7-Mar 31 may reach 10 MMT, a 3-year high.
The Thailand Office of the Cane & Sugar Board expects Thailand to export 7 MMT of sugar this (2021/22) marketing year. Thailand is the world's second-largest sugar exporter.
Immediate support and resistance for Sugar #11 lies at 18.78 and 20.00 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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