MUMBAI – Sugar prices on the Intercontinental Exchange ended down during the week in line with the fall in crude oil prices and amid improving expectations of sugar output.
The most tracked, Sugar no 11 or the July contract fell 2.0% to 12.01 cents, while the London August white sugar dropped 3.7% to $327.40 a tonne. Volumes in the July sugar no 11 contract eased to 81,027 compared with 95,732 a week ago. Volumes in the Sugar no 5 picked up to 6,503 compared with 5,921 a week ago.
Prices started on a volatile note at the beginning of the week as traders positioned themselves ahead of the May contract expiry.
The May contract, which expired on Tuesday, fell as much as 5% on Monday, while it recovered on Tuesday as most traders rolled over positions instead of taking delivery.
Around 67,000 tonnes worth May contract were delivered, the smallest since July 2014. Out of this, 1,324 lots worth $17.8 million were from Argentina, Costa Rica, Honduras, Nicaragua, and Mexico.
According to a Reuters report, Chinese trading company COFCO International was said to be the buyer of the sugar.
By the middle of the weak, the market focussed back on the movement of crude oil prices, which has been easing this week. In fact, the WTI June crude oil contract fell to a one-month low of $60.95 a barrel on Thursday following the bearish EIA data. In the week ended April 26, US crude oil production rose 0.8% on week to a record 12.3 million barrels. Crude inventories too surged by 9.93 million barrels to an over one-year high of 470.5 million barrels. Easing crude prices may prompt Brazilian millers to lower their ethanol production from what was earlier anticipated.
Meanwhile, the Brazilian real’s fall to a one-week low of 3.97 to the US dollar during the week added to the selling pressure.
Prices were also subdued as the US Department of Agriculture’s Foreign Agriculture Service report on Wednesday pegged the European Union’s 2019-20 sugar production at 19.38 million tonnes, a 7% rise on year.
Expectations of output also improved in the second largest sugar producer in the world after data released by the Indian Sugar Mills Association on Friday showed Indian mills produced a record 32.11 million tonnes of sugar between October-April, 3% higher than a year ago. ISMA expects total sugar output for the full year to be around 33 million tonnes, compared with 32.5 million a year ago. Benchmark prices fell to a seven-month low on ICE on Friday following ISMA’s data.
However, the intermittent showers in Brazil supported prices as it led to expectations that harvest might get delayed.
According to the CFTC data, managed money traders were net short 52,428 positions as on the week ended April 30, adding net short positions by 12,082 positions. Open interest for the week stood at 981,157 down 7,741 on week.
This week too Brazil may have wet weather, which could keep harvest stalled for now.
Much would depend on how crude oil prices move. The strong US jobs data released on Friday could continue to have a spill-over effect on crude oil prices this week and lend an upward bias to prices.
The July contract could face some resistance around 12.35 levels.
(Commoditiescontrol Bureau)
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