Weekly: ICE raw sugar futures edge lower amid recent rain in Brazil, weakness in Brazilian real and crude oil

Weekly: ICE raw sugar futures edge lower amid recent rain in Brazil, weakness in Brazilian real and crude oil

Mumbai (Commoditiescontrol): ICE raw sugar futures edged lower this week amid recent rain in Brazil, weakness in the Brazilian real and crude oil prices.

The most active March raw sugar contract settled lower by 0.6 cents at 19.11 cents per lb, while the March white sugar contract settled lower $13.4 at $ 498.00 last trading session on Friday.

Dealers said rains in Centre-South Brazil should boost prospects for next year's cane crop while the outlook in several other countries including India and Thailand was also improving.

Unica sees an 8.5 percent increase in agricultural yields next season, which would put the sugarcane crop at around 570 million tonnes, near the high end of recent estimates.

The new COVID-19 variant, Omicron, could also curb demand growth in coming months.

A World Trade Organization panel ruled in favor of Brazil, Australia and Guatemala on Tuesday in their trade disputes with India over sugar subsidies and asked New Delhi to conform with global rules.

India could sell more than 6 million tonnes of sugar on the world market this year with the World Trade Organization ruling that it flouted the rules by offering export subsidies unlikely to have an impact on overseas sales, trade officials said.

As per the CFTC weekly report, ICE raw sugar managed money was 183,672 contracts net long on 14th December; up 28,283 contracts from the previous week. Long side positions increased by 17,261 contracts, while short side positions witnessed a fall of 11,022 contracts. Trade was 196,227 contracts net short. Long side position decreased by 6,117 contracts while short increased by 19,718 contracts. The open interest for the week was registered at 1,049,772 vs 1,033,296 contracts last week.

Bullish Factors

Sugar prices saw support from reduced sugar production in Brazil after Unica reported Thursday that sugar production in the second half of November in the Center-South region fell 62.8 percent y/y to 160,000 MT.

In addition, the sugar content in the sugarcane crushed fell 8.7 percent y/y to 133.72 kg/ton from 146.38 kg/ton a year earlier.

Sugar has underlying support from the recent damage to Brazil's sugar crops from frost and drought.

Conab, on Nov 23, 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) recently projected a global 2021/22 sugar deficit of -2.55 MMT.

Bearish Factors

The Brazilian real fell to a 1-3/4-month low against the dollar on Wednesday, encouraging export selling by Brazil's sugar producers.

Crude oil prices dropped to a 1-week low on Wednesday, which undercuts ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production and less towards ethanol, thus boosting sugar supplies.

Recent rain in Brazil's Center-South region, which is expected to boost sugar yields.

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.

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.

Sugar has been trading in broad range of 18.46-20.94 cents/lb.Breaking of this range will depend on crude prices and Macro economic factors. But if market manages to break 20.94 cents/lblevel technically it can rally up to 23 cents on the lower end it should hold 18.46 level as Indian supply is likely to dry down at this level. Immediate support and resistance for Sugar #11 lies at 18.79 and 19.55 cents per lb, respectively.

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