Weekly ICE Sugar: Ends Firm As Crude Oil Prices Jump

MUMBAI – Sugar prices on the Intercontinental Exchange ended up last week due to rising crude oil prices. Position rollover from May to July also supported the market.

The most tracked, Sugar no 11 or the May contract increased by 1.8% to 12.76 cents, while the London May white sugar too rose 1.7% to $339.40 a tonne. Volumes in the May sugar no 11 contract jumped to 80,801 from 58,223 a week ago.

Sugar prices started the week on a bullish tone tracking crude oil prices. The WTI May crude contract jumped nearly 5% this week on the back of expectations of an economic recovery. On Friday, it touched a near 10-month high of $63.84 a barrel.

With oil prices hovering at these levels and the cane harvesting season nearing in Brazil’s center-south regions, expectations of ethanol production taking precedence over sugar may gain ground.

A number of estimates have already been made on the crushing ratio. Sugar and ethanol trader SCA expects Brazilian mills to allocate 39.5% of cane to sugar production in 2019-20 compared with 35.3% in 2018-19. Similarly, ED&F Man expects Brazilian mills’ allocation towards sugar at 39.3% next year compared with 35.2% this season. Sugar consultant Archer also expects 64% of crushing being diverted to ethanol in 2019-20.

Against the backdrop of high crude prices and low sugar prices, Brazilian sugar exports are already getting hit as per data released by the Brazilian trade ministry earlier this week. Brazilian sugar exports in March fell to seven-year low of 955,000 tonnes as millers opted to produce ethanol instead of sugar.

The Brazilian real’s recovery against the US dollar also pushed up sugar prices as it disincentivizes sugar exports. During the week, the real inched up 1.3% against the US dollar to 3.87 spurring some short-covering.

Sugar production worries, not just in Brazil, but other in other countries such as India and Thailand also kept prices firm.

Private weather forecaster Skymet earlier this week predicted lower than normal rainfalls in India this season, which has cast doubts over sugar production.

Data released by the US Commodities Futures Trading Commission data(futures and options combined) for the week to April 2 showed trade liquidated their long positions by 15144 lots and increased short position by 3834 lots thereby increasing their net short position by 18979 lots to 112882 lots. whereas managed money traders reduced their short position by 9105 lots and adding long position by 9203 lots thereby reducing short positions by 18308 lots to net short position of 74,387 lots.

For the week, weather conditions in Brazil would be one of the triggers to watch out for. If the weather turns drier, it could commence harvest and crushing for the season.

The support and the resistance for the May contracts this week are seen at 12.60 cents and 12.92 cents respectively. (Commoditiescontrol Bureau)