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Sugar Prices Close Higher With Raw Sugar Close To 2-Yr Peak

8 Feb 2020 8:46 am
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Mumbai (Commodities Control) – March white sugar was up $8.70, or 2.1%, at $422.70 a tonne after touching a 2-1/2 year high of $424.20. March raw sugar ​​was up 0.18 cents, or 1.22%, at 14.92 cents per lb, climbing back towards the two-year high of 15.13 cents set on Tuesday.

Poor crops in the European Union, Thailand, India and the United States have helped to tighten supplies, with the global market widely forecast to be in deficit in 2019/20.

The latest bullish factor for sugar prices is a drought in Thailand, the world's fourth-biggest sugar producer. The Thailand Meteorological Department says this year's drought in Thailand is the worst in 40 years. The Thai Sugar Millers Corp said on Friday that Thailand 2019/20 sugar production may drop 35% YoY to 9 MMT from 14 MMT in 2018/19 as dry conditions reduce sugarcane yields.

Sugar prices have rallied steadily over the past month with NY sugar posting a 2-year high Tuesday and London sugar climbing to a 2-1/2 year high Friday. India's Sugar Trade Association (ISMA) on Monday reported that sugar production in India, the world's second-largest sugar producer, dropped sharply by 24% YoY to 14.1 MMT during Oct 1-Jan 31.

While sugar supplies from the EU are on the decline after the European Commission reported Monday that EU sugar exports during Oct 1-Jan 22 fell 62% YoY to a 3-year low of 291,000 MT.

Meanwhile, a negative for sugar was concern about increased Brazil sugar exports due to weakness in the Brazilian real. The real on Friday fell 0.75% and posted a new record low of 4.3225 Reals/USD. The weaker real encourages export selling from Brazil's sugar producers and is therefore bearish for sugar prices.

Also current sugar supplies coming out of Brazil are robust after Monday's data from Brazil's Trade Ministry showed Brazil Jan sugar exports jumped 48.5% YoY to 1.61 MMT.

However ISO continues to maintain its stance on global sugar supply deficit. World sugar production in 2019/20 (Apr/Mar) will fall 2.3% YoY to 172 MMT, after the 0.6% YoY rise to a record 185.2 MMT in 2018/19 (ISO). The world sugar balance in 2019/20 will tighten to a 6.1 MMT deficit from the 1.7 MMT surplus seen in 2018/19, according to ISO.

Dealers said the open interest on the March contract was falling only slowly and there appeared to be plenty of interest in taking delivery given nearby supply tightness.

The open interest, as of Feb. 6, stood at 30,886 lots, equating to 1.54 million tonnes of sugar.

Support and Resistance for sugar #11 lies at 14.56 cents and 15.18 cents/lb, respectively.

(Commodities Control Bureau)

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