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ICE Raw Sugar Slips Off 2-Yr High On Falling Crude Prices

25 Jan 2020 8:27 am
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Mumbai (Commodities Control) – Raw sugar futures on ICE fell on Friday, and for the week, as falling energy prices flagged the risk two-year peaks hit the previous session would be hard to sustain.

March raw sugar ​​settled 1.2%, or 18 cents, lower at 14.39​​ cents per lb, retreating from Thursday's two-year high of 14.90 cents. The contract fell 0.4% on the week. March white sugar ​​settled lower 0.6%, or $2.20, at $396.80 per tonne, after hitting a 2-/12 year peak of $411.50 on Thursday.

Sugar prices retreated on Friday and posted 1-week lows on weakness in crude oil prices. Mar WTI crude fell 2.8% Friday to a 2-3/4 month low. Weaker crude prices undercut ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing to sugar production rather than ethanol production, this boosting sugar supplies.

Lower energy prices can tempt Brazilian cane mills to produce more sugar at the expense of ethanol. Cane is a feedstock for both products.

Dealers said the decline in energy prices had served as a reminder the sugar market has latent production capacity that is easily activated by higher prices.

Sugar prices have rallied sharply over the past three weeks on aggressive fund buying due to the outlook for smaller global sugar supplies. India's Sugar Mills Association reported on January 17 that sugar production in India dropped 26% y/y from Oct 1-Jan 15 to 10.89 MMT.

While, Unica last on January 14 reported that Brazil's Center-South sugar production in the second half of December plunged 82.4% y/y to 13,000 MT versus 73,000 MT in the same period last year.

A rally in the dollar index on Friday to a 1-1/2 month high also fueled long liquidation pressure in sugar futures. An extremely large net-long position held by funds makes the sugar market vulnerable to long liquidation pressure.

Support and resistance for Sugar #11 lies at 14.02 cents and 14.88 cents/lb, respectively.

(Commodities Control Bureau)

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