Mumbai (Commoditiescontrol): ICE raw sugar futures edged higher last week amid frost concerns in Brazil but movment in dollar and crude oil is likely to dictate sugar futures at international exchanges this week.
Market is expected to consolidate at current range of 16.50-18.15 cents per lb any break out of this range will give the directional move to price, according to the trade analysts.
The most active October contract on the ICE closed with gain of 43 points at 17.71 cents per lb in last session. The March contract settled higher by 44 points for the week at 18.10 cents per lb.
ICE white sugar futures October contract closed the week with gains of 9.2 points at $463/mt. Spread between ICE white and raw sugar was $73.
Dealers said sugar's price bias is currently neutral, caught between uncertainty over recovery in demand and concerns over the crop in top producer Brazil, with cold temperatures set to return next week.
According to preliminary information from traders, deliveries against the August expiry totaled 1,469 lots, or 73,450 tonnes. ICE will release official results on Monday.
As per the CFTC weekly report, ICE raw sugar managed money was 202,847 contracts net long on 13th July; down 25,900 contracts from the previous week.
Long side positions decreased by 19,891 contracts, while short side positions witnessed a rise of 6,010 contracts. Trade increased their long side position by 12,355 contracts and short decreased by 18,839 contracts. The open interest for the week was registered at 1,077,341 vs 1,093,942 contracts last week.
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 expected 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
A surge in shipping contract rates by 37 percent this year has curbed global demand for sugar amid a container shortage.
An agreement between the OPEC Russia led group of oil producers to boost the supply of crude oil will put pressure on crude prices and eventually on sugar prices as well.
Brazil's centre-south (CS) sugar production reached 2.89 million tonnes in the second half of June, recovering from the poor performance seen in the first half of the month when mills had produced only 2.19 million tonnes.
As per dealers sugar's upside remains capped by a lack of physical demand, fund long liquidation and from scaled down buying from commercial consumers.
The dollar further gather strength and dollar index was near its highest levels in months on Monday as the spread of the Delta coronavirus variant made investors nervous about the global recovery and sent money into safety.
Market is expected to consolidate at current range of 16.50-18.15 cents per lb any break out of this range will give the directional move to price. Immediate support and resistance for Sugar #11 lies at 17.04 and 18.12 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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