Mumbai (Commoditiescontrol): ICE raw sugar futures edged up this week amid higher crude oil prices. The most active March raw sugar contract settled higher by 0.23 cents at 20.29 cents per lb, while the most active December white sugar contract settled higher $8.8 at $ 519.70 last trading session on Friday.
"Petrobras raised gasoline prices by 6.8 percent. That, in theory, would increase the hydrous ethanol parity from 18.85 to 20.13," said a U.S. sugar broker, referring to sugar-equivalent prices for the biofuel.
Ethanol and sugar compete for cane in Brazil, with mills producing more or less depending on market prices. Higher gasoline prices lead to higher ethanol prices, and sugar usually follows.
Dealers said the market was supported by fresh export deals from India, with talk of at least 2 million tonnes already sold for the new season, and gained extra boost from a gasoline price hike in Brazil.
Pakistan has issued a new tender to purchase 50,000 tonnes of white sugar, taking the total it is currently seeking to 100,000, European traders said.
As per the CFTC weekly report, ICE raw sugar managed money was 222,509 contracts net long on 5th October; down 4,186 contracts from the previous week. Long side positions decreased by 2,383 contracts, while short side positions witnessed a rise of 1,803 contracts. Trade decreased their long side position by 8,261 contracts and short declined by 9,848 contracts. The open interest for the week was registered at 1,051,640 vs 1,049,261 contracts last week.
Bullish Factors
Higher crude oil prices benefit ethanol prices and are bullish for sugar as strength in ethanol prices may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production than sugar production, thus reducing sugar supplies.
The International Sugar Organization (ISO) on Aug 27 raised its global 2021/22 sugar deficit estimate to -3.83 MMT from a May estimate of -2.65 MMT after frost in July damaged Brazil's sugar crops.
Bearish Factors
Weakness in the Brazilian real against the dollar is bearish for sugar, as it encourages export selling by Brazil's sugar producers.
A bearish factor for sugar is the outlook for robust exports from India, the world's second-largest sugar producer. The Indian Sugar Mills Association said last Friday that it expects India to export 6 MMT of sugar in 2021/22, although that would be down 15 percent y/y from 7.1 MMT in 2020/21.
On Sep 8, the Thailand Sugar Millers Corp forecast Thailand 2021/22 sugar production could climb 44 percent y/y to 11 MMT due to beneficial rain and increased plantings. Thailand is the world's second-largest sugar exporter.
According to the International Sugar Organization (ISO), World sugar production in 2021/22 (Oct/Sep) will climb 0.18 percent y/y to 170.638 MMT from 170.335 MMT in 2020/21. The world sugar deficit in 2021/22 will widen to a 3.829 MMT deficit from a 1.453 MMT deficit in 2020/21.
The market is likely to remain firm supported by strong crude oil and increase in demand for sugar due to the opening of global economy. Immediate support and resistance for Sugar #11 lies at 19.66 and 20.66 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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