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Weekly: ICE sugar rallies to 1-week high on crude oil strength

7 May 2022 1:26 pm
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Mumbai, 7 May (Commoditiescontrol):NY raw Sugar settled marginally up by 1 point at 19.16 cents/lb for the week ended 6th May while most active August London white sugar contract settled up by $1.9 at $ 531 /MT.

ICE sugar futures scaled 1-week high and closed moderately higher on Friday, gaining support from the strength in crude oil prices. Usually, strong crude oil prices boost ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

July NY world sugar on Friday closed up by 38 cents (2.02 percent) at 19.16 cents per lb, and Aug London white sugar closed up by 9.00 (1.72 percent) at $531.30 a tonne.

Last Wednesday, sugar prices hit 1-1/2 month lows on the outlook for bigger global supplies amid prospect of sugar market shifting to surplus position. The Green Pool Commodity Specialists, in the previous week, shifted its projection for the 2022/23 global sugar market to be in surplus by 1.41 MMT versus a January forecast of a 742,000 MT deficit.

As per Conab's projection, Brazil 2022/23 sugar production seen higher by 15 percent on year to 40.3 MMT as the crop recovers from the past season's adverse weather. Also, the USDA's FAS on April 22 projected Brazil's 2022/23 sugar production would climb 2.9 percent on year to 36.37 MMT and that 2022/23 Brazil sugar exports would increase by 3.7 percent on year to 26.6 MMT.

In the shorter-term, however, Unica reported last Thursday that Brazil's 2022/23 Center-South sugar production in the first half of April fell -80 percent on year to 127,000 MT.

As per the CFTC weekly report, ICE raw sugar managed money was 181,113 contracts net long on 3rd May; down 23,934 contracts from the previous week. Long side positions decreased by 16,222 contracts, while short side positions witnessed an increase of 7212 contracts. Trade was 214,291 contracts net short; down 40,523 contracts from the previous week. Long side position decreased by 6,260 contracts while short decreased by 34,263 contracts. The open interest for the week was registered at
952,414 vs 974,124 contracts last week down by 21,710 contracts.

Bearish Factors

Strong exports from India, the world's second-largest sugar producer, are seen keeping a lid in prices. The outlook for larger sugar crop sizes in India and Thailand 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.

Meanwhile, 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.

China is expected to produce 400,000 tonnes more sugar in the 2022/23 crop, the USDA said.

Dealers said the market was supported by short covering by trade, as well as by the prospect of higher ethanol production in Brazil, which would reduce the amount of sugar the country will produce in the new season that started in April.

There was a good buying interest was seen in the market from end users at these prices levels but with the dollar strengthening and little fresh news on the fundamentals front, sugar was unlikely to make significant gains. A strong dollar makes dollar-priced sugar costlier for non-U.S. investors.

Bullish Factors

Strong crude oil prices will be supportive for sugar prices.

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.

Many sugar market participants are expected in New York next week to take part in a series of presentations and social events, on Wednesday.

Market in near term will follow crude oil prices which in turn may move up sharply if Europe decides to ban Russian crude oil.In the near-term, sugar #11 would find support at 18.75 cents while resistance is palced at 19.39 cents.

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

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