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Weekly: ICE sugar futures scaled lower amid improved sugar prospects in Brazil

9 Jan 2022 8:33 pm
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Mumbai (Commoditiescontrol): ICE raw sugar futures scaled lower this week, as recent rain in Brazil's Center-South region has improved Brazil's sugar crop prospects and sparked long liquidation in sugar futures.

The most active March raw sugar contract settled lower by 0.83 cents at 18.05 cents per lb, while the March white sugar contract settled lower $11.3 at $ 485.80 last trading session on Friday.


Dealers said an improving outlook for cane production in Brazil had helped to put the market on the defensive.

Cane harvests in India and Thailand started well and production in both countries could potentially be higher than expected.

As per the CFTC weekly report, ICE raw sugar managed money was 138,139 contracts net long on 7
th January; down 11,818 contracts from the previous week. Long side positions decreased by 6,463 contracts, while short side positions witnessed a rise of 5,355 contracts. Trade was 154,485 contracts net short; down 16,025 contracts from the previous week. Long side position increased by 7,729 contracts while short decreased by 8,296 contracts. The open interest for the week was registered at 1,023,556 vs 1,018,450 contracts last week.

Bullish Factors

Reduced sugar output in Brazil is bullish for prices after Unica reported Dec 16 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.

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 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. Conab projects Brazil's 2021/22 sugarcane crushing will fall to 525 MMT, down -13 percent y/y and the lowest in 10 years.

The International Sugar Organization (ISO) recently projected a global 2021/22 sugar deficit of -2.55 MMT.


Bearish Factors

Increased sugar production in India is negative for prices after the Indian Sugar Mills Association (ISMA) reported Monday that India's sugar production from Oct 1-Dec 31 rose +4.3 percent y/y to 11.56 MMT.

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.

Market may get support at current levels as Indian supply is likely to slow down at current levels.Near term sugar may follow trend of financial markets and other commodity market .
Immediate support and resistance for Sugar #11 lies at 17.71 and 18.61 cents per lb, respectively.

(By Commoditiescontrol Bureau: +91
9820130172)


       
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