Mumbai, 28 June (Commoditiescontrol): ICE raw sugar futures closed higher for the last week amid bullish trend in crude oil prices and weakness in Brazilian currency and the movement in both is likely to dictate global sugar futures further this week.
Apart from this, supply situation in Brazil and India will be closely watched. The draught concerns in Brazil, world’s sugar largest producer, are supporting prices of the sweetener. On other side, stockpiles of sugar in India are negative for upward movement in the prices of the sweetener.
For the first two days of the week, ICE raw sugar future closed lower on forecasts for rains in Brazil. While in later two days sugar futures gained amid rally in oil prices and strength in the Brazilian Real. On Friday, ICE raw sugar futures closed under pressure due to weaker Brazilian real, which fell back from an early 1-year high.
The July sugar contract settled higher by 47 points at 16.90 cents per lb last trading session on Friday. The most active October contract closed with gains of 65 points at 17.31cents per lb.
Dealers said the market remains firmly in the 150-point range seen this month, with Thursday's gains speculative in nature given still-bearish technical signals.
As per the CFTC weekly report, ICE raw sugar managed money was 1,99,181 contracts net long on 22nd June; down 26,793 contracts from the previous week. Long side positions decreased by 23,448 contracts, while short side positions witnessed a rise of 3,345 contracts. Trade decreased their long side position by 20,994 contracts and short also decreased by 49,232 contracts. The open interest for the week was registered at 1,065,849 contracts vs 1,139,139 contracts last week.
Drought concern in Brazil world’s top producer is supporting rallies in the prices of the sugar. Due to severe dryness in main sugar growing areas yield for sugar is likely to reduce significantly. As per some analysts, there was a scant rainfall in central Brazil last week.
Strong crude oil price prompts sugar mills to divert more cane crushing toward ethanol production rather than sugar production which reduces sugar supply.
Unica reported on Friday that Brazil Center-South sugar output fell -14.4 percent y/y in the first half of June to 2.19 MMT. Sugar production in the 2021-22 marketing year through mid-June fell -11.9 percent y/y to 9.344 MMT.
Due to increased sugar output from India, the world's second-largest sugar producer, NY sugar on Monday posted a 2-month low and London sugar on Tuesday fell to a 2-1/4 month low.
According to Indian Sugar Mills Association (ISMA), Sugar production by India will climb +13 percent y/y to 31 MMT in 2020/21 due to a good monsoon season.
The weakness of the Brazilian real is another negative factor for sugar prices. The real on Friday fell back from an early 1-year high. However, the weaker real encourages export selling by Brazil's sugar producers.
Immediate support and resistance for Sugar #11 lies at 16.96 and 17.56 cents per lb, respectively.
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