Mumbai (Commoditiescontrol): ICE sugar futures edged higher this week amid rise in crude oil prices.
The most active May raw sugar contract settled higher by 1.75 cents at 19.35 cents per lb, while the May white sugar contract settled higher $39.7 at $532.30 last trading session on Friday.
As per dealers, funds are buying sugar in the assumption that more Brazilian sugarcane will be turned to ethanol as the Russia-Ukraine crisis drives up energy prices.
Petrobras, the Brazilian oil firm, has kept silent on any fuel price increases.
Sugar gains were confirmed by a key Indian trade association, which predicted that due to favorable weather, India might export a record 7.5 million tonnes of sugar in the 2021/22 season, roughly 25 percent more than the previous estimate.
As per the CFTC weekly report, ICE sugar managed money was 59,487 contracts net long on 1st March; up 5,705 contracts from the previous week. Long side positions decreased by 2,898 contracts, and short side positions witnessed a fall of 8,603 contracts. Trade was 131,329 contracts net short; up 2,187 contracts from the previous week. Long side position decreased by 26,737 contracts and short decreased by 24,550 contracts. The open interest for the week was registered at 939,038 vs 962,025 contracts last week.
Bullish Factors
Higher crude oil prices bolster ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing to ethanol production than sugar, thus curbing sugar supplies.
The International Sugar Organization (ISO) recently cut its global 2021/22 sugar deficit estimate to -1.93 MMT from a November estimate of -2.55 MMT.
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.
Bearish Factors
Larger sugar crop sizes in India and Thailand will offset reduced sugar production in Brazil.
The Indian Sugar Mills Association (ISMA) Friday raised its India 2021/22 sugar production estimate to 33.3 MMT from a Jan estimate of 31.5 MMT, and said India's 2021/22 sugar exports will jump to a record 7.5 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.
Up side momentum in market should continue this week also due to strong crude oil prices and technical buying by manged money as market have turned bullish technically.Technically market may witness 22-23 cents per lb in coming weeks.Immediate support and resistance for Sugar #11 lies at 18.54 and 19.88 cents per lb, respectively.
(By Commoditiescontrol Bureau: +91-22-9820130172)
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