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ICE Raw Sugar Falls Due to Strong Dollar, Lower Crude Oil Prices

16 Jan 2021 8:39 am
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Mumbai Commodities Control - Sugar prices on Friday settled moderately lower as a rally in the dollar index to a 3-1/2 week high and a 2% plunge in crude oil prices sparked long liquidation pressure in sugar futures.

March raw sugar fell 1.3% to 16.46 cents per lb, having hit its highest in more than 3-1/2 years in the prior session at 16.75 cents on concerns over nearby supply tightness.March white sugar fell 0.5% to $462.10 a tonne amid an absence of selling from Thailand and the EU, and reports of global container shortages.

Citigroup on Thursday raised its 2021 sugar price estimate to 14.7 cents/lb from 13.6 cents/lb, citing "disappointment in the scale" of the government of India's subsidy for sugar exports.

Recent strength in crude oil prices benefits ethanol prices and is bullish for sugar prices. Higher crude oil prices encourage Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar production, thus curbing sugar supplies.

There is market talk of continuous buying from top consumer Indonesia, while funds, betting on a global economic recovery this year, remain keen on commodities.

"While the price overshoot could last for the March expiry, we do not believe current levels will persist over the medium-term," said Citi in a note.

"Cash-strapped Indian mills are in a rush to sell more sugar to capture the high prices ... and could use up the 6 million tonne export quota if high prices persist," it added.

Smaller sugar output from Thailand, the world's second-largest sugar exporter, is bullish for sugar prices.

Tuesday's data from the Thailand Office of the Cane & Sugar Board showed that Thailand's sugar production for the first month of the 2020/21 sugar season from Dec 10-Jan 7 was 1.3 MMT, down 54% y/y.

Also, the Thai Sugar Millers Corp reported last Friday that Thailand's cane output in the first month of the 2020/21 crushing season through January 6 was 11.96 MT, down 45.6% from the same time last year.

Support and resistance for Sugar #2 lies at 16.24 cents and 16.68 cents per lb, respectively.

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