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ICE Raw Sugar Plunges To 1 ½ Month Lows On Weak Crude, Record Low Real

29 Feb 2020 8:30 am
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Mumbai (Commodities Control) – Raw sugar futures on ICE fell to a seven-week low on Friday as concern about the spread of the coronavirus sparked widespread losses in crude oil and other commodity markets.

Sugar prices on Friday extended their week-long slide as NY sugar fell to a 1-1/2 month low, and London sugar slid to a 1-month low. Weakness in crude prices and a slump in the Brazilian real to a new record low Friday weighed on sugar prices. The Brazilian Real on Friday fell 0.39% against the dollar and posted a new record low of 4.5138 reals/USD.

May raw sugar ​​settled down 6 cents, or 0.4%, at 14.14 cents per lb, after sliding to a seven-week low of 13.88 cents. The contract was 6.4% lower on the week. May white sugar ​​settled down $2.10, or 0.5%, at $396.60 a tonne per tonne.

Meanwhile, dealers noted the recent sharp decline in crude oil prices may encourage mills in Brazil to switch to use more cane to produce sugar rather than biofuel ethanol.

"Lower oil prices are lowering prospective ethanol parity. The New York May (raws contract) has now fallen enough that it is in danger of triggering momentum investors to sell their heavy long position," Commonwealth Bank of Australia analyst Tobin Gorey said.

The market remained underpinned, however, by tightening supplies.

On Friday, sugar recovered most of its losses after the International Sugar Organization (ISO) raised its global 2019/20 sugar deficit estimate to an 11-year high of 9.4 MMT from a November estimate of 6.1 MMT.

Sugar prices have support, also, from reduced sugar output from Thailand and India.

Dealers said the expiry of the March contract later on Friday was also providing a major short-term focus.

The open interest on the March contract has been falling steadily in the run-up to expiry and stood at 19,375 lots as of Feb. 27, down 10,071 lots from a day earlier.

Support and Resistance for Sugar #11 lies at 13.73 cents and 14.41 cents/lb, respectively.

(Commodities Control Bureau)

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