MUMBAI – Sugar prices on the Intercontinental Exchange ended up marginally amid expectations of tightening supply as production in Brazil in the first half of June declined, while the monsoons in India were below normal.
The most tracked, Sugar no 11 or the October contract ended up 0.8% to 12.62 cents, while the London August white sugar ended up 1.2% to $328.40 a tonne. Volumes in the sugar no 11 stood at 65,380 compared with 51,286 a week ago. Volumes in Sugar no 5 stood at 7,870 compared with 6,596 a week ago.
With the July contract heading into expiry this week, prices started on a bearish note. Reports of unsold Thai sugar added to the selling pressure.
However by Tuesday, concerns over India’s deficit monsoons helped prices recover. Besides a late onset, India’s monsoons have been so far deficient. In the week to June 26, monsoons have been 24% below normal.
Data released from the Chinese customs office earlier this week also indicated strong demand. Data released showed Chinese May sugar imports rising 89% on year to a 13-month high of 380,000 tonnes. However, cumulative imports upto May were 15.5% lower at 930,000 tonnes.
The rise in crude oil prices in the middle of the week helped push up prices. The WTI August crude prices ended up 1.8% during the week at $58.47 a barrel amid geopolitical tensions in Iran.
Rising crude oil prices prompt Brazilian millers to produce more ethanol from their cane crushes thereby undercutting sugar production.
Meanwhile, data released by the Brazilian sugar industry association UNICA also led to some buying. The UNICA data which released ethanol and sugar sales data for the first fifteen days of June showed Brazil's Center-South sugar production in the first half of June fell 10.4% to 6.71 million tonnes. Mills crushed 34.04% of total cane for sugar during the period compared with 34.96% a year ago.
However, the July contract expiry and worries over a large physical delivery provided some resistance to prices.
According to a Reuters report, July expiry on Friday led to the largest delivery on record. Sucres et Denrees, Alvean, ED&F Man, and Louis Dreyfus Company took delivery of the July raw sugar. The delivery against the July raw sugar contract on ICE Futures totalled 41,500 lots equivalent to about 2.1 million tonnes of raw sugar, the report said. At Friday’s closing price of 12.32 cents per lb, the sugar is worth over $570 million.
The Brazilian real’s weakness against the US dollar also checked the rise in prices. The real fell 0.8% against the US dollar this week to end at 3.85.
According to the CFTC data, managed money traders were net short 40,911 positions as on the week ended June 25, adding 16,608 net long positions on week. Open interest for the week stood at 1,00,755, down 45,333 on week.
With the July expiry contract out of the way, prices are likely to take direction from fundamental cues.
With rains picking up pace in India, prices could soften this week on expectations it might improve the prospects of the crop.
The October contract could trade in the wide band of 12.41-12.98 cents this week.
(Commoditiescontrol Bureau)