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Weekly ICE Sugar: Ends Little Changed As weak Real Offsets Rise

4 Aug 2019 9:57 pm
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MUMBAI – Sugar prices on the Intercontinental Exchange ended little changed last week as uncertain weather conditions in Brazil and looming deficit worries about the 2019-20 crop were offset by a weak Brazilian real and improving monsoon conditions in India.

The most tracked, Sugar no 11 or the October contract ended unchanged at 12.02 cents, while the London October white sugar ended up 0.8% to $323.70 a tonne. Volumes in the sugar no 11 improved to 48,703 compared with a two-month low of 26,025 hit a week ago. Volumes in Sugar no 5 were at 4,031 compared with 1,752 a week ago.

Prices started on a firm note amid local weather reports suggesting frost-like conditions hitting the Parana and Minas Gerias regions of Brazil over the weekend and next week. Last month’s frost conditions in Brazil have affected 400,000 hectares of cane fields according to Brazilian sugarcane association UNICA.

Meanwhile higher deficit forecasts for 2019-20 by analysts continued to support prices.

Monday, the agricultural research body Pecege forecast Brazil’s 2019-20 sugarcane crop at 559 million-570 million tonnes, down from 573 million tonnes in the previous season.

On Friday, Australia-based Green Pool Commodity Specialists Friday hiked their 2019-20 sugar deficit expectations to 3.67 million tonnes from 1.62 million projected earlier. Green Pool also expected sugar production in Brazil’s centre-south region lower at 25.8 million tonnes, down from the previous forecast of 26.8 million.

Through the middle of the week, prices remained bullish taking cues from firm crude oil prices and the high demand for the biofuel ethanol.

Wednesday, the WTI September crude oil contract touched a two-week high of $58.82 a barrel amid geopolitical tensions in Iran over the seized British oil tanker. The weekly EIA data also added to the rise as it declined by 8.5 million barrels, more than expectations of a fall by 2.7 million barrels.

The rising demand for ethanol in the wake of firm crude prices further added to the bullishness. Brazil’s economic research centre CEPEA reported record ethanol prices in July, which has risen over 6% during the month. In fact, hydrous ethanol prices in the week ended July 26 is said to have risen for the fourth straight week to a 3-month high of 1.7157 reals/litre. The latest bi-monthly data released by UNICA last week showed Brazil's Centre-South ethanol producers sold 914.08 million litres of hydrous ethanol in the first two weeks of July, registering an increase of 17.31% on year.

However, by Thursday crude oil prices turned around and declined sharply by 7.9% amid global slowdown concerns, bringing down sugar prices along with it.

Adding to the turn-around in sugar prices was the Brazilian real’s continued weakness against the US dollar during the week.

The real has weakened 3% against the US dollar to end at 3.89, slipping to an over one-month low on Friday. A weak real prompts Brazilian millers to increase their sugar production to take advantage of the attractive exchange rate.

The abundant near-term supplies coupled with the above-average rainfall in India in the past few days also managed to reverse gains made in sugar earlier in the week.

The above-average rainfall in the month of July has narrowed the rainfall deficit to 9%, the Indian Meteorological Department said on Thursday. The IMD also said that rainfall in the country in August-September is likely to be normal.

Data released earlier this week showed that Brazilian sugar exports fell 1.1% on year to 1.69 million tonnes. A Bloomberg report said ports in Brazil are expected to ship 364,339 metric tons of sweetener in the next few weeks, about half what was scheduled a year ago.

The latest CFTC data showed that managed money traders were net short 129,801 positions as on the week ended July 30, adding 13,498 net long positions on week. Open interest for the week stood at 1,086,225, up 1,584 on week.

This week, prices could be led by the weather in Brazil and the extent of the showers and frost in the centre-south regions.

However, there could be resistance at higher levels as the strong monsoon revival in India could keep prices in check.

The October contract is seen moving in the 11.78-12.24 cents range this week.

(Commoditiescontrol Bureau)

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