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Weekly ICE Sugar: Ends Down On Brazilian Real’s Persistent Weakness

14 Oct 2019 7:40 am
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MUMBAI – Sugar prices on the Intercontinental Exchange ended down last week, despite the lacklustre fortnightly sugarcane production data from Brazil’s centre-south region, as the Brazilian real’s persistent weakness put pressure on prices.

The most tracked, Sugar no 11 or the March 2020 contract ended down 2.7% at 12.41 cents, while the London December white sugar ended down 1.6% at $339.90 a tonne. Volumes in the sugar no 11 rose to 59,214 compared with 40,783 a week ago. Volumes in Sugar no 5 eased to 5,704 compared with 9,500 a week ago.

Prices started on a weak note with the Brazilian real descending from its three-week high of 4.05 the previous week. On Monday, the real fell sharply to 4.11 to the dollar.

The US Department of Agriculture’s Foreign Agricultural Service also raised the sugarcane crushing estimate for 2019-20 in Brazil to 635 million tonnes from 627 million tonnes estimated in April, which lent to the fall.

During the week, there was some mild support from Brazil’s sugarcane crushing data for the second half of September released by the Brazilian sugarcane industry association UNICA.

Sugar production during the period rose 39.2% on year to 1.79 million tonnes, below consensus analyst estimates of around 1.87 million tonnes. Cumulative sugar production since April 1 stood at 21.8 million tonnes, down 2.4% on year. Total ethanol production rose 33.0% on year to 2.18 billion litres.

Total cane crushed in the second half of September was 35.086 million tonnes, up 26.1% year on year. An S&P Global Platts survey had estimated cane crush at 36.4 million tonnes.

The white sugar contract was also supported owing to the pound’s fall to a 1-month low of 1.22 against the US dollar. The white sugar contract, priced in pounds, becomes cheaper, with the fall in the pound.

However, the persistent weakness in the Brazilian real checked the rise in sugar prices and weighed on the sweetener.

On Thursday, the real touched a one-week low of 4.14 to the dollar, falling 1.3% during the week.

A weak real prompts Brazilian millers to divert more cane towards sugar production to avail of the attractive exchange rate.

Demand concerns over sugar also kept prices low as Singapore--considered to be Asia’s biggest per capita consumer of sugar--became the first country to ban advertisements for packaged drinks with very high sugar content.

The latest CFTC data showed that managed money traders’ net short positions widened slightly to 186,767 as on the week ended October 8, reducing 10,619 net short positions on week. Open interest for the week stood at 1,020,546, down 16,381 on week.

This week prices are likely to take cues from the dollar’s movement not just against the real but against major currencies. If the real continues its Friday recovery against the dollar, prices could reverse this week’s trend and trade higher. The support and resistance for the March contract are seen at 12.26 cents and 12.52 cents respectively.

(Commoditiescontrol Bureau)

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