Mumbai (Commoditiescontrol): ICE sugar futures closed mixed this week. The most active May raw sugar contract settled lower by 0.02 cents at 17.60 cents per lb, while the May white sugar contract settled higher $7.7 at $492.60 last trading session on Friday.
Dealers highlighted that a surge in energy prices had sparked speculation that cane, rather than sugar, might be used to create biofuel ethanol in the future, notably in Brazil.
Petrobras, Brazil's state-owned oil firm, has taken a wait-and-see approach towards domestic fuel prices, so ethanol demand may be unaffected in the short term.
As per Citi, one factor contributing to sugar's bearish outlook is Brazil's sluggish ethanol demand. Prices might drop to as low as 16 cents in six to twelve months.
The March contract's expiration on Monday provided a short-term focus, with the premium to May jumping to 0.45 cents per pound.
As per the CFTC weekly report, ICE sugar managed money was 53,782 contracts net long on 22nd February; down 4,565 contracts from the previous week. Long side positions decreased by 3,417 contracts, while short side positions witnessed a rise of 1,147 contracts. Trade was 129,142 contracts net short; up 9,692 contracts from the previous week. Long side position decreased by 12,202 contracts and short decreased by 2,511 contracts. The open interest for the week was registered at 962,025 vs 972,840 contracts last week.
Bullish Factors
Strength in the Brazilian Real is bullish for sugar prices. 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
Weakness in crude undercuts ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing to sugar production rather than ethanol, thus boosting sugar supplies.
Larger sugar crop sizes in India and Thailand will offset reduced sugar production in Brazil.
The Indian Sugar Mills Association (ISMA) on last Thursday reported that India's 2021/22 Oct-Feb 15 sugar production was up 5.6 percent y/y at 22.1 MMT. India is the world's second-largest sugar producer.
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.
Market are likely to remain volatile due to Ukraine and Russia conflict .But Strong crude oil prices are likely to support sugar prices further huge short potions by trade will support the prices at lower levels.Immediate support and resistance for Sugar #11 lies at 17.30 and 18.12 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-40015505)
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