MUMBAI (Commoditiescontrol) – Sugar prices on the Intercontinental Exchange ended firm during the week with crude prices and the Brazilian real turning out to be the major triggers. The February crushing report in Brazil and independent projections of a deficit in global supply added to the rise.
During the week, the Sugar no 11 May contract rose 2.8% to end at 12.52 cents on Friday. The London May white sugar made lower gains, rising only 0.7% to $340.70 a tonne. Volumes through the week have sharply fallen in the most active May contract to 62,818 from 80,171 previous week.
Early-on during the week, crude prices jumped, setting the tone for sugar prices as well. The WTI crude May contract rose 4.4% during the week to a four-month high of $58.52 a barrel. Crude has been rising owing to expectations of lower supplies as detailed by the weekly EIA report and reports of Saudi Arabia cutting output. Higher crude oil prices prompts Brazilian millers to divert their cane crushing to produce ethanol—a bio-fuel and a proxy to crude petroleum.
The Brazilian real also contributed to the rise in sugar prices. Although the real touched a one-week low of 3.87 to the dollar, it recouped all its losses made during the week and ended firm 0.8% to 3.81. A strong real disincentivises sugar exports and therefore may deter millers from crushing cane for sugar.
A report by Brazilian sugar industry association UNICA showing a lower cane crushing and sugar production also pushed up prices.
According to the UNICA report, 543,000 tonnes of sugarcane was crushed in the key centre-south region in the second half of February, down 26% from 731,000 tonnes of sugarcane crushed a year ago. This number is around 92% higher from 280,000 tonnes crushed in the first half of February. But, cumulative crush for the year now stands at 546.14 million tonnes, down 3.6% on year.
Meanwhile, total sugar production was down 26.5% on year to 26.36 million tonnes, while total ethanol production surging 19.4% on year to 30.43 billion liters, indicating millers are favouring ethanol production over sugar.
Adding to supply concerns were French sugar trader Sucden’s expectations of a larger deficit of around 4 million tonnes in the world’s sugar supply balance in the 2019-20 crop year (October-September).
The upward momentum in prices got a break with the fa weather conditions in Brazil. There are hopes riding on the good weather to improve output with the harvest season just around the corner in Brazil.
Data released by agricultural consultant Agroconsult Thursday showed that Brazil’s 2019-20 center-south crop cane crop that starts in April is likely to touch 575 million tonnes, registering the first year-on-year rise since 2015-16.
According to the US Commodities Futures Trading Commission Data, for futures and option combined, managed money traders were net short 115,049 positions as on the week ended March 12, adding net short 46,323 positions. Open interest for the week stood at 1,024,632 up 63,533 on the week.
This week, crude prices could continue to affect price movements. The weekly EIA data will yet again be in focus. Amid strong demand in China and Indonesia, prices could remain firm. However, weather patterns in South America will also be a key factor. As of now, “above average rain” is expected in the center-south region, Somar Meteorologia said in a statement earlier this week.
Technical support for Sugar no 11 is seen around 12.33 followed by 12.13 levels. The resistance for the contract is seen around 12.65 and 12.77 levels.
(By Commoditiescontrol Bureau)
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