MUMBAI – Sugar prices on the Intercontinental Exchange ended down during the week, despite the rise in crude oil prices and the Brazilian real, amid expectations of ample supply.
The most tracked, Sugar no 11 or the October contract ended down 0.5% to 12.30 cents, while the London August white sugar ended down sharply by 4.1% to $323.20 a tonne. Volumes in the sugar no 11 eased to 49,097 compared with 66,714 a week ago. Volumes in Sugar no 5 were at 10,171 compared with 8,732 a week ago.
Sugar prices started the week on a bullish note tracking the rise in crude oil prices and due to concerns that the frost-like conditions over the last weekend would have disrupted the crop.
The August WTI crude oil prices inched up 4.7% during the week, touching an over one-month high of $60.94 a barrel amid geo-political tensions and as weekly crude inventories fell 9.5 million barrels, more than expectations of a 3.0 million barrel fall.
However, concerns over the crop damage abated amid reports that the destruction was minimal leading to softer sugar prices the next day.
By the middle of the week, prices recovered yet again as the crude oil prices and the Brazilian real had strengthened.
The Brazilian real rose 2.2% during the week, rising to a 3.73, a near four-month high. Higher crude oil prices and a stronger Brazilian real prompts millers to divert their cane crushes away from sugar production, thereby lifting sugar prices.
Data released by UNICA, the sugarcane association in Brazil, added to the mid-week rise. Brazil’s centre-south produced 2.19 million tonnes of sugar in the second half of June, down 4% on year. Meanwhile, Brazilian mills produced 2.33 billion litres of ethanol during the period, down 1.2%. Meanwhile, mills allocated 37% to sugar production in the second half of June, similar to last year’s levels.
However, with news of India receiving above-normal rainfalls in the week to July 10 for the first time since the season began on June 1, helped ease prices yet again. The improved rainfall helped cut the rainfall deficit in the country to 14% compared with 28% deficit a week ago.
Helping the fall in prices was the Indian Sugar Mills Association projection last week where it said it foresees India's sugar stockpiles at the beginning of 2019-20 season at a record 14.5 MMT even as output is likely to fall 14.5% on year to 28.2 million tonnes.
Prices also fell by the end of the week, with the August London contract falling over 4% ahead of its expiry on Tuesday.
There are expectations that just like the July contract its delivery could lead to a huge supply in the market.
Last week, the July contract expired with a record delivery at 2.1 million tonnes indicative of the supply in the market.
According to the CFTC data, managed money traders had net short postion of 33,464 contracts as on the week ended July 9, adding 2,258 net short positions on week. Open interest for the week stood at 993,232, up 15,462 on week.
Next week, prices are likely to trade with a softer bias until the expiry of the August contract.
Ample sugar stocks in India coupled with adequate rains in the country could also lead to some selling pressure.
The October contract is likely to get some support around 12.20 cent levels.
(Commoditiescontrol Bureau)
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