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Weekly: ICE Sugar Ends Down On Expectations Of Near-Term Supply Glut

8 Sep 2019 6:52 pm
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MUMBAI (Commoditiescontrol) – Sugar prices on the Intercontinental Exchange ended down last week in the run-up to the expiry of the benchmark contracts amid expectations of a supply glut in the near-term.

The most tracked, Sugar no 11 or the October contract ended down 1.1% at 11.02 cents, briefly slipping below the psychological 11-cent mark during the week, while the London October white sugar ended down 0.5% to $309.60 a tonne. Volumes in the sugar no 11 rose to 85,498 compared with 58,742 a week ago. Volumes in Sugar no 5 jumped to 13,163 compared with 5,711 a week ago.

Tuesday, prices opened firm following a long weekend as the International Sugar Organisation estimated a fall in sugar production by 2.3% to 172 million tonnes. The ISO also scaled down its 2018-19 global sugar surplus estimate 1.7 million tonnes from 1.8 million estimated previously. For 2019-20, the ISO projected a global sugar deficit of 4.8 million tonnes.

However, prices soon reversed trend thereafter amid expectations of near-term supplies in the run-up to the expiry of benchmark contracts. The London Sugar contract will expire later this week, while the New York contract will expiry by the end of the month.

Like last month, huge deliveries are expected against these contracts, keeping prices low through the week and pushing the sugar no 11 to an over 11-month low of 10.86 cents and the sugar no 5 to a near two-month low of $300.00 per tonnes.

News reports also suggested ample supplies from India and Thailand pressurising sugar prices.

The latest CFTC data showed that managed money traders’ net short positions stood at 189,100 as on the week ended September 3, adding 17,494 net short positions on week. Open interest for the week stood at a record 1,240,536, up 20,881 on week.

The Indian government’s export subsidy plan of up to 6 million tonnes to sugar mills announced the previous week also weighed on prices. In addition, the Brazilian government’s decision last week to increase tariff-free US ethanol imports to 800 million litres per year compared with 600 million litres now also kept sentiment subdued. This move is seen prompting Brazilian millers to move away from ethanol production and opt for sugar production instead.

Meanwhile, data released by the Brazilian trade ministry showed Brazil exported 1.51 million tonnes of raw sugar in August compared with 1.43 million tonnes a year earlier, adding to the global sugar supply.

However, there was some support at lower levels from the firm crude oil prices and the rising Brazilian real.

The WTI crude oil contract gained 2.6% during the week to $56.52 a barrel, while the Brazilian real inched up by 2.1% at 4.06 per dollar.

The Indian government’s decision on Tuesday to increase the procurement price of ethanol from all sources by up to 3.5% starting Dec 1 also provided some support. This move is aimed at increasing the production of ethanol and thereby absorbing the excess sugar supply in the country.

This week prices are likely to remain subdued with the London contract heading into expiry. The October contract could re-test the psychological 11-cents mark yet again but some support is seen around 10.90 levels.

(Commoditiescontrol Bureau)

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