Mumbai (Commoditiescontrol): ICE raw sugar futures scaled higher this week amid strength in the Brazilian Real.
The most active May raw sugar contract settled higher by 0.02 cents at 17.81 cents per lb, while the May white sugar contract settled higher $1.4 at $489.40 last trading session on Friday.
Sugar prices are expected to remain high, according to Tereos, the world's second-largest sugar producer, as the global market remains in deficit for the third year in a row, while Europe faces supply constraints.
Egypt's cabinet said in a statement on Wednesday that it aims to boost sugar production by about 500,000 tonnes per year.
As per dealers, the market has been supported by recent strength in energy prices, which boosts the motivation to utilize cane instead of sugar to make biofuel ethanol, notably in top producer Brazil.
"While elevated crude oil prices will support sugar prices, we think that they will ease back later this year and put downward pressure on sugar prices throughout the remainder of 2022," Fitch Solutions said in a note.
Deliveries against the March white contract's expiration were reported to total 7,173 lots, or 358,650 tonnes.
As per the CFTC weekly report, ICE sugar managed money was 60,472 contracts net long on 8th February; down 10,542 contracts from the previous week. Long side positions increased by 4,417 contracts, and short side positions witnessed a rise of 14,960 contracts. Trade was 87,680 contracts net short; down 11,931 contracts from the previous week. Long side position increased by 22,800 contracts and short increased by 10,869 contracts. The open interest for the week was registered at 1,083,479 vs 1,050,724 contracts last week.
Bullish Factors
Strength in crude benefits 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.
There is limited down side from current level as Indian supply drys downs below 20cents/lb further low prices will prompt Brazilian producer to shift from sugar to Ethanol. Immediate support and resistance for Sugar #11 lies at 17.50 and 18.10 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)