MUMBAI – Sugar prices on the Intercontinental Exchange ended marginally up during the week despite a fall in crude oil prices as the Brazilian real recovered sharply against the US dollar.
The most tracked, Sugar no 11 or the July contract rose 1.0% to 11.66 cents, while the London August white sugar gained 0.9% to $324.40 a tonne. Volumes in the July sugar no 11 contract improved to 70,347 compared with 61,085 a week ago. Volumes in Sugar no 5 fell to 4,552 compared with 6,173 a week ago.
The Brazilian real staged a sharp comeback after having fallen to a new over seven-month low of 4.12 against the US dollar on Monday. By Tuesday, the real recovered to 4.03 levels. By Friday, the real had risen to as high as 4.00 per dollar, registering a near 2% rise during the week.
As the real gets stronger it leaves Brazilian millers with little incentives for exporting sugar, thereby leading to a fall in production.
Meanwhile, the string of forecasts on sugar production made last week continued this week as well with the Greenpool Commodity Specialists revising up their forecasts of a deficit in 2019-20 from 1.6 million tonnes earlier to 3 million tonnes due to higher demand for ethanol.
There were some media reports that stated Brazil’s Jan-Apr sales of hydrous ethanol increased 35% on year 7 billion liters as per the latest data released on Tuesday. This reinforced expectations of strong demand for ethanol.
By the middle of the week, more data followed that added to the upward pressure. Data released by the Brazilian sugar industry UNICA showed that the centre-south mills crushed 38.63 million tonnes of cane in the first half of May, around 10% lower on year. Production of sugar also fell 16% during the period at 1.59 million tonnes. UNICA also said that mills are carrying a crushing delay equivalent to 20 million tonnes of cane.
Although crude oil prices started on a firm note at the beginning of the week, it gave up its gains during the week amid concerns that the trade war between US and China may hit demand.
The WTI July crude oil contract ended down 6.6% on week to $58.63 a barrel on Friday after hitting an over two-week high of $63.96 on Monday, checking gains in sugar prices.
Meanwhile, a Reuters report said quoting the Brazilian Agriculture Ministry that the country had reached an agreement with China on tariffs applied on Brazilian sugar imports. The dispute will no longer head to the World Trade Centre for resolution.
According to the CFTC data, managed money traders were net short 41,760 positions as on the week ended May 21, adding net short positions by 30,201 positions. Open interest for the week stood at 1,167,140 up 24,546 on week.
This week prices could soften if the weather in Brazil turns favourable for harvest to pick up.
In addition the movement of the real and crude oil prices could dictate the sugar market.
Although prices could tend lower in the near-term to around 11.87 cent levels, the medium term looks firm amid increasing expectations of a deficit in the 2019-20 season.
(Commoditiescontrol Bureau)
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