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Mumbai (Commodities Control) – NY Sugar dropped over 3% or 53 points for the week ended 14th May, as the most active ICE July contract settled in red on Friday; just below 17 cents per lb. It was a volatile week for the sweetner, as the most active contract soared past 18.25 cents during mid-week only to witness a steep slide in the later part of the week. This happens to be the first weekly decline for Sugar #11 in six weeks.
Last week, ICE Raw Sugar marked its fifth consecutive gain, 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 for the week ended 7th May.
This week’s downfall is attributed primarily to profittaking by speculators and risk-off sentiment in wider financial markets. Crude oil slumped 3% on Thursday, prompting liquidation pressure in sugar futures, as it undercut ethanol prices.
Raw sugar futures on ICE closed lower on Friday, extending the market's retreat from a 2-1/2-month peak set earlier this week.
July raw sugar settled down 0.15 cent, or 0.9%, at 16.96 cents per lb. August white sugar settled down $1.90, or 0.4%, at $453.60 a tonne. For the week, Sugar #5 lost 2.39% or $11.10/Tonne. The active contract went as high as $485/T on Wednesday and pared a chunk of gains in the later part of the week.
Raw sugar futures on ICE closed 4% lower on Thursday, as July raw sugar settled down 0.73 cent at 17.11 cents per lb, on fund sales.
On Wednesday, sugar prices rallied to 2-1/2 month highs on concern excessive dryness in Brazil will curb sugar yields. Market observes that Brazil is confronting the worst drought in eighty years and it was expected to account for over 60% of the world's raw sugar exports. Brazil's sugar production fell 25% late in April.
During the week, Unica reported that 2021/22 Center-South sugar production (Apr/Nov) was down 25.5% y/y in the second half of April to 1.515 MMT. The percentage of cane used for sugar fell to 44.54% in 2021/22 from 45.76% in 2020/21.
Also, China's sugar imports in the current 2020-21 season to end-September should reach 4.5 million tonnes, versus 3.76 million in the year-ago season, data showed.
However, the situation with coronavirus in India is also seen as a bearish factor, with lockdowns hurting consumption.
"There is plenty of white sugar available in India for the market and London has been the weaker market to date," said Jack Scoville at Price Futures Group in Chicago.
The Indian Sugar Mills Association reported early this month that India's sugar output during Oct 1-Apr 30 rose 16% y/y to 29.92 MMT from 25.81 MMT a year earlier due to a bumper crop and increased cane crushing.
Having said so, Rabobank expects the July and October raw sugar contracts to trade between 15.5-18.5 cents per lb due mostly to soaring ethanol prices in Brazil, which tend to tempt mills to divert more cane to ethanol production rather than sugar.
The South American nation is seeing record prices for ethanol as consumers there take advantage of easing Covid-19 restrictions and travel again, increasing consumption of the biofuel. That means mills could start processing more sugar cane into ethanol, rather than into sweetener.
However, "As most of the (Brazilian) sugar is committed (for sale) already, ethanol prices will need to rise considerably more in order to claw a larger share of cane."
On the technical side, ICE raw sugar managed money net long position rebound from last week by 9,254 contracts to 259,721 contracts in the latest week to May 11, CFTC data showed. The decline in the net longs were the result of simultaneous rise in long position by 8,975 contracts and drop in short position by 279 contracts. The open interest was reported at 12,37,304 contracts vs 11,66,032 contracts in the past week.
Odds seem to be in favour of a firm price trend in sugar for 2021-22 as well.
On Friday, Tropical Research Services (TRS) said in a report that the outlook for the global sugar market is tightening with a projected global surplus for 2021/22 shrinking, while a deficit in the current 2020/21 season has widened.
TRS projected a surplus of 2.48 million tonnes, raw value, in 2021/22 (October/September) compared with a surplus of 5.18 million forecast in February, driven primarily by a reduced outlook for production.
Global production in 2021/22 was seen at 188.94 million tonnes, down from 191.51 million seen previously, while global consumption was barely changed at 184.38 million versus 184.50 million forecast in February.
Support and resistance for Sugar #11 lies at 16.58 and 17.64 cents per lb, respectively.
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