Mumbai (Commoditiescontrol): ICE raw sugar futures edged higher this week amid strength in crude oil prices and the Brazilian real.
The most active March raw sugar contract settled higher by 0.67 cents at 19.94 cents per lb, while the March white sugar contract settled higher $7.8 at $ 506.30/MT last trading session on Friday.
Dealers said the market derived support from gains in crude oil. Cane can be used to produce either biofuel ethanol or sugar in some countries, so high energy prices can curb output of the sweetener.
As per the CFTC weekly report, ICE raw sugar managed money was 170,619 contracts net long on 2nd November; up 7,730 contracts from the previous week. Long side positions increased by 6,203 contracts, and short side positions witnessed a fall of 1,527 contracts. Trade was 206,370 contracts net short. Long side position increased by 2,583 contracts and short also increased by 6,778 contracts. The open interest for the week was registered at 1,059,937 vs 1,051,847 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.
A rally in the Brazilian real against the dollar gives sugar prices a boost as the stronger real discourages export selling from Brazil's sugar producers.
Sugar has underlying support from the recent damage to Brazil's sugar crops from frost and drought.
A potential bullish factor for sugar prices is the emergence of a La Nina weather pattern across the equatorial Pacific.
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
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 Oct 15 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.
Strong crude oil and strong Brazilian Real are likely to keep sugar prices firm in near term.Immediate support and resistance for Sugar #11 lies at 19.40 and 20.26 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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