MUMBAI – Sugar prices on the Intercontinental Exchange ended slightly down last week taking cues from the Brazilian real’s fall and soft crude oil prices. Expectations of huge supply from India also led to a fall in prices.
The most tracked, Sugar no 11 or the March 2020 contract ended down 0.7% at 12.32 cents, while the London December white sugar ended down 0.5% at $333.40 a tonne. Volumes in the sugar no 11 eased to 45,952 compared with 59,214 a week ago. Volumes in Sugar no 5 rose to 8,493 compared with 5,704 a week ago.
Sugar prices started on a firm note at the beginning of the week as traders covered their short positions. Prices were also elevated on expectations of demand from China after the country’s commerce ministry allowed private firms to apply for low-tariff sugar import quotas, earlier solely allocated to state-owned companies. China left its 2020 sugar import quota unchanged at 1.945 million tonnes of which 70% is allocated to state-owned companies.
Investment bank J.P. Morgan also released its quarterly report which projected a deficit of 6.4 million tonnes in 2019-20 owing to tightening supplies. This added to the price rise in the initial part of the week.
However, sugar prices soon turned around by mid-week and declined noting that the Brazilian real slipped to a three-week low of 4.19 per dollar. A weak real prompts Brazilian millers to divert their cane crushes towards sugar production rather than ethanol production.
Prices also fell as crude oil prices remained subdued, with the WTI November contract declining 1.7% to $53.87 per barrel last week.
Expectations of large supplies from India also put pressure on prices according to news reports. Rabobank on Thursday said that it expected "significant" sugar exports from India in 2021 as the record monsoons is said to have boosted India's 2020-21 sugar crop.
India has been in talks to export sugar to Iran, Indonesia and China. In fact, Indian mills aim to export around 50,000 tonnes of sugar to China according to recent reports.
Although the real recovered most of its weekly losses by Friday, it wasn’t enough to push up sugar prices.
The latest CFTC data showed that managed money traders’ net short positions widened slightly to 192,012 as on the week ended October 15, reducing net short positions to 5,245 on week. Open interest for the week stood at 1,033,815, up 13,269 on week.
This week traders will take cues from the Brazilian real’s movement. Continued weakness in the real could keep prices subdued. On the other hand, expectations of a global sugar deficit in 2019-20 are likely to offer some support to prices.
The initial support and the resistance for the March contract is seen at 12.23 cents and 12.37 cents respectively.
(Commoditiescontrol Bureau)
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