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ICE Raw Sugar Ends at 1-1/2 Week Low on Ample Supply, Demand Concerns; Crude Rally Limits Fall

11 Jul 2020 8:19 am
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Mumbai (Commodities Control) - Sugar prices on Friday moved lower for a third day, with NY sugar at a 1-1/2 week low and London sugar at a 6-week low on ample supplies and suspect demand.

Sugar supplies are abundant after Unica on Thursday reported that Brazil's Center-South sugar production in the second half of June rose 23.3% y/y to 2.728 MMT, with the percentage of cane used for sugar climbing to 47.42% in 2020/21 from 37.06% in 2019/20.

On the positive side, Unica also reported that total exports of ethanol by Brazil Center-South mills in June rose 44% y/y to 267 mln liters, which indicates pressure for less sugar production and more ethanol production.

October raw sugar ​​settled down 0.08 cents, or 0.7%, at 11.76 cents per lb​. August white sugar ​​settled down $4.70, or 1.4%, at $335.40 a tonne.

Sugar futures closed down despite rising oil prices, a rare detachment between the two asset classes as higher energy prices are usually seen as cutting sugar production in top producer Brazil in favor of ethanol making.

Brazilian mills cumulative sugar output this season is 48.75% above last season.

"A (Brazil) production change (i.e. sugar mix decrease) is unlikely as sugar prices still beat ethanol," said trader Czarnikow.

U.S. sugar stocks-to-use ratio increased for both old and new crop years on Friday, due to higher imports and production, while expected consumption was unchanged, according to data from the U.S. Department of Agriculture.

Losses in sugar were limited Friday on a 2% rally in crude prices. Higher crude oil prices are positive for ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing to ethanol production rather than sugar production, thus curbing sugar supplies.

Support and Resistance for sugar #11 lies at 11.54 cents and 12.04 cents per lb, respectively.

(Commodities Control Bureau)

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