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Weekly: ICE Sugar Ends Up On Lower Output Views From Brazil, India

29 Sep 2019 11:54 pm
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MUMBAI – Sugar prices on the Intercontinental Exchange ended up last week led by the fall in the fortnightly sugar output data from Brazil and expectations of lower production from India.

The most tracked, Sugar no 11 or the March 2020 contract ended up 4.6% at 12.62 cents, while the London December white sugar ended up 4.8% at $341.40 a tonne. Volumes in the sugar no 11 stood at 68,534 compared with 70,617 a week ago. Volumes in Sugar no 5 stood were at 7,845 compared with 7,333 a week ago.

Sugar prices began on a strong note amid expectations that the sugar output data for Brazil’s centre-south region for the first fifteen days of September would be lower.

In its survey, S&P Global Platts had pegged sugar output to fall by 3.1% to 2.1 million tonnes. The market too had factored in a fall by 3-4%.

Data released on Tuesday, however, showed a much bigger fall, pushing up prices further. According to the data, sugar production in Brazil's centre-south during the period declined 5.6% on year to 2.04 tonnes. The cumulative sugar output in 2019-20 until mid-September stood at 20.01 million tonnes, down 4.9% on year.

UNICA also maintained its projection of Brazil’s 2019-20 centre-south sugar production falling by 5.7% on year to a 14-year low of 25 million tonnes on increased ethanol production.

Back in India, Maharashtra state’s sugar commissioner Shekhar Gaikwad said production in the state may be lower at 5.2 million-5.3 million tons in the year starting October 1, compared with a previous estimate of 6.44 million tons and half of last year’s 10.7 million tons. Gaikwad explained the lower production is likely to be because of the excess rainfall that has hit crops in some parts. The earlier prolonged dry spell also prompted cane farmers to sell their produce as cow feed at attractive rates.

The lower fortnightly numbers from Brazil along with expectations of lower output from India kept prices firm for the most part of the week.

However, in the latter part of the week, the weak crude oil prices provided some resistance to the London white sugar contract, while it dragged down the New York raw sugar futures.

The November WTI crude oil prices ended 3.7% lower at $55.91 per barrel during the week amid easing geopolitical tensions in Saudi Arabia and a consensus of a slowing global economy.

The real also briefly fell to a one-month high of 4.19 to the dollar during the week, providing some resistance. The real ended down 0.3% to 4.16 during the week.

The New York contract also gave up some of its gains by the end of the week ahead of the October contract expiry, although deliveries are expected to be only modest.

The latest CFTC data showed that managed money traders’ net short positions narrowed slightly to 213,854 as on the week ended September 24, reducing 20,986 net short positions on week. Open interest for the week stood at 1,119,725, up 20,006 on week.

This week, prices are likely to remain firm amid expectations of a global sugar deficit due to the reduced output expectations from the world’s two major sugar producers. If crude oil prices and the real continue to weaken, it could provide some resistance at higher levels.

The support and the resistance for the March contract this week is seen at 12.40 cents and 12.82 cents respectively.

(Commoditiescontrol Bureau)

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