Mumbai, 12 July (Commoditiescontrol): Sugar futures are likely to trade in range-bound this week amid tracking more clarity on crop loss in Brazil due to frost and global demand concerns due to which ICE raw sugar futures finished lower last week. Sugar may get support from strength of crude oil and other agri commodity markets as well.
ICE raw sugar futures edged lower last week as demand concerns weighed on sugar prices. The most active October contract closed with loss of 87 points at 17.28 cents per lb. The March contract settled lower by 71 points at 17.66 cents per lb last trading session on Friday.
Sugar analyst said, "There is simply not the level of spec interest required to sustain the higher levels and so instead we began to slide once more."
According to the dealers, the recent weakness of the Brazilian currency has also been a pressure factor since it attracts selling from the world's top producer.
The United States reallocated to other countries lower-tariff sugar import quotas.
As per the CFTC weekly report, ICE raw sugar managed money was 228,747 contracts net long on 6th July; up 28,040 contracts from the previous week. Long side positions increased by 25,338 contracts, while short side positions witnessed a fall of 2,702 contracts. Trade increased their long side position by 3,028 contracts and short also increased by 33,980 contracts.
Bullish Factors
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.
According to the International Sugar Organization (ISO), world sugar production in 2020/21 (Oct/Sep) will fall -0.2 percent y/y to 169.2 MMT after falling -8.4 percent in 2019/20 to 169.6 MMT. The world sugar deficit in 2020/21 will widen to a -3.1 MMT deficit from a +900,000 MT surplus in 2019/20.
Bearish Factors
Physical demand is seen weak because of high freight rates but possibly also because consumption is not improving despite ease in covid-19 induced lockdowns.
As per the Conab forecast, Sugar production by Brazil, the world's largest sugar producer, in 2020/21 (Apr/Mar) will climb by +32 percent y/y to 39.3 MMT from 29.8 MMT in 2019/20, as millers divert 46.4 percent of cane juice to produce sugar (up from 34.9 percent in 2019/20) due to the weak outlook for ethanol demand and prices.
As per reports frosts in Brazil last week might not cause significant damage to cane fields. Mills are still assessing the extent of the problem.
The Indian Sugar Mills Association on June 17 reported that India's sugar output during Oct 1-Jun 15 rose +13% y/y to 30.7 MMT from 27.1 MMT a year earlier due to a bumper crop and increased cane crushing.
Sugar production in the European Union is forecast to rise in the 2021/22 season leading to an increase in stocks of the sweetener. India might conclude further sales without government subsidies if prices remain above 18 cents.
For coming week market are likely to remain range-bound.Markets will be looking for more clarity as regards to crop loss in Brazil due to frost. Market may get support from strength crude and other agri commodity markets. and Immediate support and resistance for Sugar #11 lies at 17.01 and 17.59 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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