Mumbai (Commodities Control) - Sugar no. 11 registered third consecutive weekly gain, the most active contract settled 31 points or 1.87% higher for the week ended 23rd April. July raw sugar on ICE futures ended the week at 16.88 cents per lb, on Friday, with modest losses as it consolidated below Thursday's 2-month highs.
On Friday, Raw sugar hit its highest level since late February, above 17 cents per lb. May raw sugar closed basically flat at 16.91 cents per lb, after peaking at 17.08 cents, while July raw sugar ended at 16.88 cents per lb. August white sugar settled down $1.20, or 0.3%, at $461.20 a tonne on Friday and gave up $2.10 or 0.45% for the week, marking its first weekly loss in three weeks.
NY Sugar July futures posted a robust 7.5% or 116 points gain for the week ended 16th April, as the most-active contract settled at 16.57 cents per lb on Friday. On the other hand, Sugar #5 closed 7.02% or $30.40 higher last week.
Dealers said sugar remains well supported, with a diminished crop outlook in Brazil and the European Union.
Fund buying continues to support sugar prices on concern about reduced global sugar production. Dry conditions may curb sugar yields in Brazil after Somar Meteorologia recently said that soil moisture in Brazil's sugar-cane growing regions has been insufficient to provide good development of cane crops.
On the technical side, ICE raw sugar managed money net long position rose for the second straight week, by 45,067 contracts to 223,302 contracts in the latest week to April 20, CFTC data showed. The rise in the net longs were the result of simultaneous rise in long position by 36,278 contracts and reduced short position by 8,790 contracts. The open interest was reported at 11,62,988 contracts vs 12,119,612 contracts.
Meanwhile, Citi lowered its 2021-22 sugar surplus forecast to around 2.9 million tonnes, 22% less than its March estimate, primarily due to crop downgrades in Brazil. The bank sees second quarter prices averaging 16.2 cents/lb.
Czarnikow said April should end as the driest in a decade in Brazil, with rains 70% below average, adding that it sees a possible downside to its current estimate of 580 million tonnes for the centre-south cane crop.
Sao Paulo, which makes up 68% of Brazil's total cane production, has seen the driest weather in 20 years in five of the six months through March, and yield losses could be as high as 20% in some areas, according to Somar.
Early this week, Wilmar International said that because of prolonged dryness, Brazil's 2021/22 cane crop may barely reach" 530 MMT, down 12% y/y and the lowest in a decade. In addition, severe frost in France, the largest sugar producer in the EU, has damaged 10% of France's sugar beet crop, according to farmer group CGB.
Wednesday's projections from the USDA for sugar output were mixed for prices. On the bullish side, the USDA's Foreign Agricultural Service (FAS) projects Brazil Center-South sugar-cane production in 2021/22 will fall 4% to 580 MMT. Conversely, the USDA's FAS projects India 2021/22 sugar-cane production will climb 2.1% y/y to 389 MMT.
Adding to the bearish factor for sugar is concern that a record jump in weekly global Covid infections might prompt governments to tighten pandemic restrictions that curb economic growth and demand for commodities, including sugar. Also, the resurgence of the pandemic will keep restrictions in place that crimp fuel demand and encourage Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol production, thus boosting sugar supplies.
Amidst all the supply-demand factors impacting the price trend is the sweetener, the currency experts point towards a yet important development that is likely to reflect on the booming commodities prices.
Experts note that the Brazilian Real may be ready to establish a longer term bullish uptrend. If this be true, then the inflationary currency translated impacts could be unleashed onto Agricultural prices at a time of hyper bullish fundamentals. This currency inflation tailwind would allow for a more enduring move higher in prices and super charge those agricultural markets with the most bullish underlying set of fundamental factors.
Having said so, support and resistance for Sugar #11 lies at 16.50 cents and 17.28 cents per lb, respectively.