Mumbai (Commodities Control) - ICE Raw Sugar marked its fifth consecutive gain for the week ended 7th May, even as the active July contract settled a tad bit lower at 17.49 cents per lb on Friday. NY sugar July contract gained 3% or 51 points during the latest week.
It is to be noted that the sweetener edged as high as 17.90 cents during the week on global supplies concerns owing to unfavourable weather conditions in producing regions.
Last week, NY Sugar barely managed to gain 10 points or 0.59% for the week ended 30th April.
In the latest week, Global sugar prices on Friday settled mixed on consolidation after recent gains. July raw sugar settled down 0.06 cent, or 0.3%, at 17.49 cents per lb, having hit a 1-1/2-week high of 17.89 cents on Thursday.
August white sugar settled up $1.80, or 0.4%, at $464.70 a tonne. For the week, Sugar #5 or white sugar garnered 2.54% or $11.50/Tonne.
July NY sugar rallied to a contract high Thursday on concern the dry conditions in Brazil will curb sugar yields. Maxar on Thursday said that Brazil's Center-South, the country's largest sugar-growing region, is expected to see dry weather through May 9 with little rain over the next ten days.
Last Thursday, Czarnikow said rain in Brazil's Center-South region from October through March was 36% below average, the biggest drought in more than a decade.
Meanwhile, Center-South May rainfall in the first half is expected to be 93% below average, 1 mm instead of 15 mm. On the other hand, second-half May rainfall is expected to be 12% below average, 44 mm instead of 50 mm.
A rally in the Brazilian real on Friday is supportive of sugar prices. The real rose 0.96% Friday to a 3-3/4 month high against the dollar. The stronger real discourages export selling by Brazil's sugar producers.
Having said so, dealers pointed that sugar might see some selling in the near-term given the widening discount for the July contract versus October, a bearish signal indicating increased nearby supply.
They added, however, that July should find support below 17.20 cents per lb, with a deteriorating supply outlook in top producer Brazil meaning the market is ultimately still poised for gains.
Meanwhile, according to Sao-Paulo based traders ethanol prices have dramatically increased in a short period of time because ethanol stocks are extremely tight. "The market's tremendous ongoing upward price movement will attain a price which effectively stymies demand or incentivizes mills to switch more cane crushing toward ethanol production over sugar production."
An ethanol inventory report released on April 30 showed a drop of 205 million liters in ethanol stocks between the official start of the harvest and April 16, according to the Ministry of Agriculture, Livestock and Supply.
On the technical side, ICE raw sugar managed money net long position dropped for the first time in four weeks, by 7,232 contracts to 250,467 contracts in the latest week to May 4, CFTC data showed. The decline in the net longs were the result of simultaneous fall in long position by 8,252 contracts and short position by 1,020 contracts. The open interest was reported at 11,66,032 contracts vs 11,98,578 contracts.
Seery Futures notes, “.. will be looking at adding more contracts once the risk/reward becomes more in your favor possibly next week.. still think the $20 level will be breached. Fundamentally speaking prices are seeing support from the dry conditions in Brazil, which will curb sugar yields.”
They add, “..Sugar prices are trading far above their 20 and 100 moving average. The trend is to the upside as the commodity continues to ride the coattails of crude oil higher on a weekly basis and...see no reason to be short".
Immediate support and resistance for Sugar #11 lies at 17.13 and 17.87 cents per lb, respectively.
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