MUMBAI (Commoditiescontrol) – Sugar prices on the Intercontinental Exchange ended mixed last week amid contrasting triggers emerging from crude oil prices and the Brazilian real.
The most tracked, Sugar no 11 or the July contract increased inched up 0.1% to 12.92 cents, while the London May white sugar ended down 0.2% to $337.30 a tonne.
Prices started the week on a bearish note, ignoring the fundamental triggers, as traders booked profits following the recent rise.
However, by Tuesday, sugar started tracking the rise in crude prices.
Crude prices have been on an uptrend for the past few days because of supply worries and expectations that demand may pick up in countries such as China. The WTI May crude contract gained 1.3% in the past week to $63.33 a barrel. Data released earlier this week showed Chinese March exports rising 14.2% on year, the biggest jump in five months. Meanwhile, OPEC crude production in March fell by 295,000 barrels to a four-year low of 30.385 million barrels. However, the rise was limited as the weekly EIA data showed a rise in crude oil inventories by around 7 million barrels.
With crude pricing registering a rise, there are views that Brazilian millers may favour producing the biofuel ethanol rather than producing sugar. With the harvest season in Brazil around the corner, the ratio of ethanol production over sugar will be crucial to watch.
Expectations of tighter supply in the second-largest sugar producing state in India also kept prices elevated. Tuesday, Managing Director of the Maharashtra State Co-operative Sugar Factories Federation Ltd Sanjay Khatal said that production in the state in India may fall 25% on year to a three-year low of 8 million tonnes in 2018-19. Expectations of poor monsoons in India this year is likely to hit sugar production next year as well.
Leading softs broker Marex Spectron has pegged India’s 2019-20 sugar production to drop 9.2% on year to 29.8 million tonnes due to the lower-than-expected monsoons.
In fact, the El Nino effect in south-east Asia is seen hampering production in countries such as Thailand as well.
Prices also got some thrust following the Brazilian sugar industry association UNICA’s report that showed that the Center-South Brazilian sugar season ended March 31 reported a cane crushing of 573.072 million tonnes, down 3.9% from the 596.330 million tonnes crushed a year ago. Total sugar production fell 26.5% on year to 26.5 million tonnes, while total ethanol production on the year jumped 18.6% to 30.949 billion liters.
On the other hand, the Brazilian real weakened to a two-week low of 3.90 to the dollar on Friday, which checked the gains in sugar. A weaker Brazilian real prompts millers to produce more sugar for export to take advantage of the attractive exchange rate.
According to the CFTC data, managed money traders were net short 46,864 positions as on the week ended April 9, adding net long positions by 27,522 positions. Open interest for the week stood at 1,050,420 down 1,181 on week.
This week, showers are expected in some parts of Brazil’s centre-south region which is could deter harvesting and keep prices firm. Crude oil prices will continue to offer cues to the market.
The July contract is seen in the 12.80-12.98 range in the near-term.
(By Commoditiescontrol Bureau)