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ICE Sugar ends higher tracking firm oil; likely to maintain firm stance

28 May 2022 1:35 pm
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Mumbai, 28 May (Commoditiescontrol): ICE sugar futures are expected to maintain upward momentume given the tight supplies, India export bans and crude oil prices moving north.

On Friday, the sweeter moved higher tracking strong oil amid prospect of less sugar exports from Brazil. Prices also found support from strength in the Brazilian real which rose to a 5-week high against the dollar. A stronger real discourages export selling by Brazil's sugar producers.

July sugar #11 closed up by 7 (0.36 percent) to 19.61 cents, and Aug London white sugar #5 closed up by 2.40 (0.42 percent) at $567.80 a tonne.

Strength in crude oil served as top bullish factor for sugar. Crude prices Friday climbed to a 1-week high. Higher crude prices benefit ethanol prices and may prompt Brazil's sugar mills to divert cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

Another positive for sugar is smaller output from Brazil after Unica reported Wednesday that Brazil 2022/23 Center-South sugar production through May 15 was 2.737 MMT, down 39.8 percent on year.

Ethanol production was down 10 percent to 1.65 billion liters, said Unica, whose ethanol data also includes fuel made from corn.

Cuba's emblematic sugar harvest topped out at just over half of the communist-run government's target this year, according state-run newspaper Granma, representing another major blow to the country's already crisis-racked economy.

That 2021-2022 harvest hit just 52 percent of the goal for the season, Granma said, or approximately 474,000 tons. That is nearly half of last year's crop of 800,000 tonnes, which was already the worst since 1908.

Ramped-up sugar output in India is bearish for prices after data from the Indian Sugar Mills Association (ISMA) reported that India's 2021/22 sugar production during Oct 1-May 15 rose 14.4 percent on year to 34.88 MMT.

Bearish Factor

The outlook for larger sugar crop sizes in India and Thailand is bearish for sugar prices. On April 15, the 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.

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.

The outlook for bigger global sugar supplies is negative for prices. Green Pool Commodity Specialists on April 29 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.

Bullish Factor

India sugar prices are likely to remain firm despite New Delhi's move to cap exports as stockpiles are set to fall to the lowest level in five years amid record shipments and robust local demand, industry officials told Reuters.

India on Tuesday imposed restrictions on sugar exports for the first time in six years by capping this season's shipments at a record 10 million tonnes, up from last year's 7.2 million tonnes.

Sugar prices are unlikely to drop because of the curbs as stockpile has depleted due to robust domestic demand and record exports, said Ashok Jain, president of the Bombay Sugar Merchants Association.

The government estimates opening sugar stocks at the beginning of the new marketing year on Oct. 1 could fall to 6.2 million tonnes, which would be the lowest in five years.

Sugar prices in Mumbai eased only 0.3 percent since the government announced the curbs.

India's sugar consumption in 2021/22 marketing year ending on Sept. 30 could jump 5% from to a record 27.8 million tonnes, government estimates.

During festivals in December quarter, sugar prices could move higher if the country receives lower-than-normal monsoon rains, said a trader based at Kolhapur in the western state of Maharashtra.

Global Outlook

World sugar production in 2022/23 (Oct/Sep) will climb 2 percent on year to 174.400 MMT from 174.000 MMT in 2021/22 (ISO). The world sugar surplus in 2022/23 will expand to 2.8 MMT from a surplus of 237,000 MT in 2021/22 (ISO). 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.

For Sugar #11 Jul '22 contract, support is placed at 19.43 cents while resistance seen near 19.76 cents.

As we approach end of this month, the Markets will be shut on Monday in observance of Memorial Day. However, they will open Monday night for the Tuesday session. USDA reports are pushed back a day with Export Inspection on Tuesday morning and Crop Progress that afternoon. Move to Thursday and EIA will release ethanol production and stocks data. Weekly Export Sales data will also be a day late, with the report published on Friday morning.

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

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