Mumbai (Commodities Control) – Raw sugar futures on ICE closed marginally down in a holiday-shortened week. Market recovered from weekly lows primarily by a surge in crude oil prices after a U.S. airstrike in Baghdad killed the head of Iran's elite Quds force.
The most tracked, Sugar no 11 or the March raw sugar settled down 22 points at 13.20 cents per lb, . While March London white sugar settled down $4.2 at $357.2 per tonne.
Sugar prices on Friday rallied as crude prices soared on Middle East tensions. Crude prices surged to an 8-month high Friday after the U.S. launched a drone attack Thursday night in Baghdad that killed a top Iranian general, which prompted Iran's Supreme Leader Ayatollah Ali Khamenei to threaten "severe retaliation" for the attack.
The surge in crude prices benefits ethanol prices and may encourage Brazil's sugar mills to divert more cane crushing to ethanol production rather than sugar production, thus curbing sugar supplies.
The market was also supported by the sentiment that Thursday's decline, when prices fell 2.2%, had been overdone. NY sugar prices on Thursday fell to a 4-week low and London sugar fell a 2-week low on signs that India sugar crushing is picking up its pace.
India's Sugar Mills Association reported Thursday that India Oct-Dec sugar production was down 30% YoY to 7.8 MMT. This was an improvement from last month's data that showed Oct-Nov sugar production fell 54% y/y to 1.89 MMT.
However, a report from India's National Federation of Cooperative Sugar Factories Ltd., earlier, suggested that sugar production by India, in 2019/20, will fall 15% y/y to a 3-year low of 28 MT due to drought and a delayed monsoon season.
Even ISO sees the world sugar balance in 2019/20 tightening to a -6.1 MMT deficit from the +1.7 MMT surplus seen in 2018/19.
Meanwhile, recent data from Conab has provided a cushion to sugar prices, as well, as it suggested tighter future sugar supplies. Conab on 19th December cut its Brazil 2019/20 sugar production estimate by 5.3% to 30.1 MMT from an Aug estimate of 31.8 MMT.
Also, a fortnight back Unica reported that Brazil’s Center-South sugar production in the first half of December plunged 92.4% y/y to 33,000 MT versus 432,000 MT in the same period last year.
Prices have been range-bound for the last couple of weeks, after a rally that took prices to a more than one-year peak of 13.67 cents per lb on Dec. 13 ran out of steam.
Brazil exported 1.29 million tonnes of raw sugar in December, down from 1.43 million in the same month of 2018, official data showed on Thursday.
Another negative for sugar was the weakness in the Brazilian Real which fell -0.68% on Friday to a 1-week low against the dollar. A weaker real encourages export selling from Brazil's sugar producers.
An extreme long position by funds is a potential bearish factor for London sugar prices after Friday's weekly Commitment of Traders (COT) data showed that funds boosted their net-long London sugar positions by +2,601 contracts in the week ended Dec 31 to a 13-month high of 13,468 contracts. The large long position could provide the fuel for long liquidation pressure.
NY Sugar #11 has support at 13.10 cents and resistance at 13.70 cents per lb.
(By Commoditiescontrol Bureau; +91-22-40015502)
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