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Weekly: ICE raw sugar futures edge lower amid virus concerns, weaker crude oil and Brazilian real

6 Dec 2021 8:54 am
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Mumbai (Commoditiescontrol): ICE raw sugar futures edged lower this week amid virus concerns, weaker crude oil prices and Brazilian real and long liquidation by managed money.

The most active March raw sugar contract settled lower by 0.6 cents at 18.75 cents per lb, while the March white sugar contract settled lower $14.5 at $ 486.90 last trading session on Friday.

Dealers said sugar is unlikely to head higher despite positive fundamentals because the market remains fixated by the Omicron variant and has weeks to wait before the emergence of data on the scale of the threat it poses to global health.

"Fundamentally speaking, on sugar, things tend to look more bullish rather than bearish. But not many are still paying much attention to fundamentals these days remaining hypnotized by the bloodbath that happens especially in crude oil and in the energy complex," CovrigAnalytics said in a weekly update.

As per the CFTC weekly report, ICE raw sugar managed money was 178,233 contracts net long on 30th November; down 50,752 contracts from the previous week. Long side positions decreased by 39,332 contracts, while short side positions witnessed a rise of 11,419 contracts. Trade was 187,735 contracts net short. Long side position increased by 12,700 contracts while short decreased by 44,242 contracts. The open interest for the week was registered at 1,049,970 vs 1,099,101 contracts last week.

Bullish Factors

Concern about smaller global sugar supplies sparked fund buying of sugar futures and pushed NY sugar to a new 4-3/4 year high earlier last month. Rabobank said that Brazil is expected to face a sugarcane shortage next year, which will limit its capacity to increase exports. Rabobank also said the development of Brazil's sugarcane crop is being delayed by frost damage and delays and that high crude oil prices will help keep sugar prices high into next year.

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

Weaker crude oil prices are putting downward pressure on ethanol prices, which could lead to more sugar mills diverting cane crushing to sugar production rather than ethanol production, boosting sugar supplies.

Another bearish factor for sugar prices is weakness in the Brazilian real. The weaker real encourages export selling by Brazil's sugar producers.

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.

India sugar output is robust after the ISMA reported on Thursday that India sugar production from Oct 1-Nov 30 rose +9.7 percent y/y to 4.72 MMT.

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 +0.08 percent y/y to 170.47 MMT from 170.335 MMT in 2020/21.

Market are likely to get support at current level as it seems that most of the long liquidation by managed money has been done .Further any positive news on crude will support the market. Immediate support and resistance for Sugar #11 lies at 18.50 and 19.08 cents per lb, respectively.

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

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