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Weekly: ICE raw sugar futures edge lower amid robust sugar export sales from India, higher sugarcane crush in Brazil, weaker crude oil

29 Nov 2021 8:01 am
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Mumbai (Commoditiescontrol): ICE raw sugar futures edged lower this week amid robust sugar export sales from India, larger-than-expected sugarcane crush in Brazil, weaker crude oil prices.

The most active March raw sugar contract settled lower by 0.64 cents at 19.35 cents per lb, while the March white sugar contract settled lower $11.2 at $ 501.40 last trading session on Friday.

"Sugar is following crude lower as it trades to its lowest point (19.15) since Oct. 25," said a U.S. sugar broker.

The decline accelerated as key support levels were breached including a trend line at 19.56 cents.

The CFTC will release its Commitments of Traders data on Monday.

Bullish Factors

Weather concerns in Brazil are a major bullish factor for sugar prices, with Brazil having experienced its worst drought in 100 years and as several bouts of frost in Brazil have damaged some sugar cane crops.

Conab on Tuesday cut its Brazil 2021/22 sugar production estimate to 33.9 MMT from an Aug forecast of 36.9 MMT, down -17.9 percent y/y.

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

Weak crude prices undercut ethanol prices and are bearish for sugar. A more than 12 percent plunge in crude oil prices on Friday to a 2-3/4 month low weighed on sugar prices.

According to industry group Unica, Brazilian center-south mills produced 626,000 tonnes of sugar in the first half of November, 49.7 percent less than a year ago. The volume was still higher than the market expected.

The Indian Sugar Mills Association (ISMA) said India currently has an opening balance of +8.18 MMT of sugar as of Oct 1 and needs to export about 6 MMT in 2021/22, although that would be 15 percent y/y less than 7.1 MMT in 2020/21. Millers have shipped 270,000 MT of sugar in Oct and are expected to export more than +200,000 MT in Nov.

The International Sugar Organization (ISO) recently projected a global 2021/22 sugar deficit of -2.55 MMT, a smaller deficit than an August forecast of -3.58 MMT.

As per the India Sugar Mills Association, sugar production from India, the world's second-largest sugar producer, will climb +13 percent y/y to 31 MMT in 2020/21 due to a good monsoon season.

A negative factor for sugar is the outlook for higher Thailand sugar exports after Czarnikow projected Thailand 2021/22 sugar exports would surge +67 percent y/y to 6.7 MMT.

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 may remain under pressure in current week tracking weak crude oil prices but downside will be limited as export from India may slow down at the current price level giving support to the prices. Immediate support and resistance for Sugar #11 lies at 18.83 and 19.99 cents per lb, respectively.

(By Commoditiescontrol Bureau: +91-22-40015505)

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