MUMBAI – Sugar prices on the Intercontinental Exchange ended down sharply as the improving weather conditions in Brazil and India have built hopes of adequate supply in the upcoming season.
The most tracked, Sugar no 11 or the October contract ended down 4.2% to 12.48 cents, while the London August white sugar ended down 3.1% to $324.60 a tonne. Volumes in the sugar no 11 contract halved to 51,286 compared with 111,531 a week ago. Volumes in Sugar no 5 were 6,596 compared with 5,929 a week ago.
Sugar prices started on a weak note pushed down by the weak Brazilian real and the softening crude oil prices.
The Indian Sugar Mills Association’s report last week that pegged exports from India to rise to a record 7 million tonnes in 2019-20 to reduce the huge backlog of stock also weighed on prices for the entire week. This number is sharply higher than the 3 million tonnes estimated in 2018-19.
However, both the crude oil prices and the Brazilian real soon reversed their trends with sugar prices overlooking these cues.
Traders instead focussed on CEO of Copersucar João Roberto Teixeira’s comments that cited high global inventories and the good weather in Brazil that is said to have helped sugar plantings. There are reports that the harvest in Brazil’s centre-south region is in full swing.
Some media reports also cited unsold Thai-based sugar supply in the market that has been bearing down on the markets.
While demand for ethanol continues to remain high in Brazil and the US, a number of companies are also looking at corn-based ethanol production, which is further weighing down on prices.
According to a Reuters report, Brazilian-based sugar manufacturer Sao Martinho plans to invest over $94 million in a new corn-based ethanol plant along with its Boa Vista mill.
According to the CFTC data, managed money traders were net short 57,519 positions as on the week ended June 18, adding 59,905 net long positions on week. Open interest for the week stood at 1,053,088, down 92,927 on week.
The Indian monsoons too seem to be progressing gradually, which is expected to help the crop.
After a late onset, the Indian monsoons hit the drought-hit region of Maharashtra earlier this week and heavy rains are predicted for the region, which is also a sugarcane rich belt.
The Indian Meteorological Department has predicted the rains to cover Bihar, Odisha and Jharkhand over the next three days.
If rains continue as predicted and if the weather in Brazil remains conducive for harvesting planting, prices could ease further to around 12.30 cents levels.
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