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Weekly: ICE sugar futures drop second week in a row as global availability improve

30 Apr 2022 3:12 pm
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Mumbai, 30 April (Commoditiescontrol): ICE sugar futures extended their fall for second straight week, thanks to the shift in global sugar availability projection, which has now placed sugar availability is placed at comfortable level, and a small delivery notice for May contract.

The most active July raw sugar contract Friday closed down by 0.08 cents (0.42 percent) at 19.15 cents per lb, while August white sugar contract closed up by 1.90 (0.36 percent) at $529.40 a tonne. ICE raw sugar price is down 0.32 percent on a week, while white sugar edged 0.20 percent lower.

Sugar prices came under pressure Friday after Green Pool Commodity Specialists shifted its projection for the 2022/23 global sugar market to be in surplus by 1.41 MMT from a January forecast of a 742,000 MT deficit.

Deliveries of raw sugar on the expiry of the May contract were seen at 3,573 lots, or around 181,500 tonnes, a relatively small volume, according to preliminary information from traders on Friday. These are early indication to possible building of prolonged price weakness.

The CoT report from the Commodity Futures Trading Commission (CFTC) showed on Friday, that both speculators and money managers/hedge funds have trimmed their net long position. Money managers and hedge funds cut 18,332 contracts in raw sugar to a net long position of 100,783 lots. The decision highlights risk-off trading stratergy ahead of the Federal Reserve meet, wherein the central bank is expected to hike interest rate by 50 basis points.

However, slide in sugar prices may soon be arrested as signs of smaller sugar output in Brazil are emerging. Thursday's data from Unica showed Brazil's 2022/23 Center-South sugar production in the first half of April fell 80 percent on year to 127,000 MT. This was in stark contrast with Brazil's crop agency, Conab's 2021/22 sugar production estimate of 35 MMT.

Bearish factor:

A bearish factor for sugar was last Wednesday's projection from Conab for Brazil 2022/23 sugar production to increase by 15 percent on year to 40.3 MMT as the crop recovers from the past season's adverse weather.

Last Friday's report from the USDA's FAS projected Brazil's 2022/23 sugar production to climb 2.9 percent on year to 36.37 MMT and that 2022/23 Brazil sugar exports seen higher by 3.7 percent on year to 26.6 MMT.

The outlook for larger sugar crop sizes in India and Thailand to offset reduced sugar production in Brazil is bearish for prices. On April 15, the Indian Sugar Mills Association (ISMA) raised India's 2021/22 sugar production estimate to 35 MMT from 33.3 MMT, up 12.2 percent on year, 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's 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. As a result, 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.

Bullish Factor:

Sugar prices would continue to drive strength from strong crude prices. Newyork crude oil benchmarkt, the West Texas Instrument (WTI) crude posted a 1-1/2 week high Friday. Higher crude prices benefit ethanol prices and could prompt Brazil's sugar mills to divert more cane crushing to ethanol production rather than sugar, thus curbing sugar supplies.

In a bullish factor, the International Sugar Organization (ISO) recently cut its global 2021/22 sugar deficit estimate to 1.93 MMT from a November estimate of 2.55 MMT.

World sugar production in 2021/22 (Oct/Sep) expected to climb 1 percent on year to 170.510 MMT from 170.335 MMT in 2020/21, according to the ISO. The world sugar deficit in 2021/22 will shrink to a 1.93 MMT deficit from a 2.29 MMT deficit in 2020/21.

Sugar production by Brazil, the world's largest sugar producer, in 2020/21 (Apr/Mar) will climb by 32 percent on year to 39.3 MMT from 29.8 MMT in 2019/20, as millers divert 46.4 percent of cane juice to produce sugar (up from 34.9 percent in 2019/20) (Conab). Sugar production from India, the world's second-largest sugar producer, will climb 13 percent on year to 31 MMT in 2020/21 due to a good monsoon season (India Sugar Mills Association). 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.

Immediate support and resistance for Sugar #11 lies at 19.05 and 19.33 cents respectively.

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

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