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Weekly ICE Sugar: Prices End Down Led By Weaker Crude Oil Prices, Real

12 Aug 2019 7:42 am
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MUMBAI (Commoditiescontrol) – Sugar prices on the Intercontinental Exchange ended down last week mainly led by the fall in global crude oil prices and the Brazilian real. Prices, however, got supported with the partial reversal in crude prices and the real later during the week.

The most tracked, Sugar no 11 or the October contract ended down 1.3% at 11.86 cents, while the London October white sugar ended down 1.6% to $318.60 a tonne. Volumes in the sugar no 11 improved to 66,255 compared with 48,703 a week ago. Volumes in Sugar no 5 were at 6,830 compared with 4,031 a week ago.

Prices began on a weak note and held onto its weakness until mid-week as crude oil prices and the Brazilian real registered multi-month lows.

Wednesday, the WTI September crude oil contract fell to a seven-month low of $50.52 a barrel amid expectations that the global slowdown would hit demand. During the week, the contract eased by 2.1% to $54.50 a barrel.

The Brazilian real too slipped 1.3% during the week to end at 3.94 a dollar. On Wednesday, the real fell to an over two-month low of 3.99 to the dollar.

Weak crude oil prices coupled with the soft Brazilian real prompt Brazilian millers to divert their cane crushes towards sugar rather than ethanol.

Prices were also weighed by the improved rainfall situation in India. Wednesday, the Indian Meteorological Department said that rainfall has been above average for the second straight week up to August 7. During that week, India received 28% more rainfall than the 50-year average, narrowing the rainfall deficit for the season to 5%.

Higher 2019-20 sugar deficit projections continued to provide some support to prices.

On Tuesday, INTL FCStone raised its global 2019-20 sugar deficit estimate to a 4-year high of 5.9 million tonnes from its earlier forecast of 5.7 million tonnes driven by lower sugar production in India. This comes on the back of a hike in 2019-20 sugar deficit expectations last week by Australia-based Green Pool Commodity Specialists to 3.67 million tonnes from 1.62 million projected earlier.

In the latter part of the week, prices recouped some losses tracking the recovery in crude oil prices and the real. However, this was not enough to erase its weekly losses.

The Brazilian sugarcane industry association UNICA on Friday said that sugar production in Brazil's centre-south region in the second half of July fell by 5.5% on year to 2.48 million tonnes. Sugar output so far until July was down 10% on year to 13.34 million tonnes. However, overall cane crushing improved to 49.69 million tonnes in the last 15 days of July, up 4.2% on year and above the S&P Global Platts estimate of 48.04 million tonnes.

The latest CFTC data showed that managed money traders were net short 140,311 positions as on the week ended August 6, adding 10,511 net short positions on week. Open interest for the week stood at 1,120,379, up 34,154 on week.

With the rainfall situation in India continuing to show improvement, albeit the flood situation in parts of Maharashtra, prices are likely to remain soft this week.

Crude oil prices and the real could continue to give direction to the market.

The support and the resistance for the October contract are likely to be around 11.56 cents and 12.03 cents respectively.

(Commoditiescontrol Bureau)

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