Mumbai (Commoditiescontrol): ICE raw sugar futures edged higher this week amid strength in crude oil prices and Brazilian real.
The most active March raw sugar contract settled higher by 0.03 cents at 18.23 cents per lb, while the March white sugar contract settled higher $3.3 at $498.50 last trading session on Friday.
According to dealers, sugar will struggle to rise above 19 cents due to good crop prospects in key producers India and Thailand, as well as expectations that even top producer Brazil's crop will recover from last year's adverse weather.
In the 2021/22 marketing year, India is expected to produce 31.45 million tonnes of sugar, up nearly 3.1 percent from the previous estimates, with output expected to increase in the key western state of Maharashtra.
In its first forecast for the period, analyst said on Monday that a small global sugar deficit is expected in 2022/23.
As per the CFTC weekly report, ICE raw sugar managed money was 71,014 contracts net long on 1st February; down 23,285 contracts from the previous week. Long side positions decreased by 700 contracts, while short side positions witnessed a rise of 22,585 contracts. Trade was 99,611 contracts net short; down 22,708 contracts from the previous week. Long side position increased by 27,322 contracts and short increased by 4,614 contracts. The open interest for the week was registered at 1,050,724 vs 1,023,309 contracts last week.
Bullish Factors
Higher crude oil prices benefit ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.
The stronger real discourages export selling from Brazil's sugar producers.
Reduced sugar output in Brazil is bullish for prices after Unica reported on Jan 12 that 2021/22 Center-South sugar production through Dec was 32.029 MMT, down 16.14 percent y/y.
In addition, the sugar content in the sugarcane crushed fell 1.55 y/y to 142.92 kg/ton from 145.17 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
Sugar prices are under pressure on expectations that bigger sugar crops in India and Thailand will offset sugar production losses in Brazil.
The Indian Sugar Mills Association (ISMA) reported India 2021/22 Oct-Jan sugar production was up 5.7 percent y/y at 18.71 MMT.
The Thailand Office of the Cane & Sugar Board reported Jan 10 that Thailand 2021/22 sugar production during Dec 7-Jan 6 rose 58 percent y/y to 1.9 MMT. Thailand is the world's second-largest sugar exporter.
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.
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.
Immediate support and resistance for Sugar #11 lies at 17.85 and 18.49 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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