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Weekly:ICE Raw Sugar At 14-Month High On Global Supply Deficit, Hopes Of China’s Ethanol Imports

12 Jan 2020 1:41 pm
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Mumbai (Commodities Control) – Raw sugar prices on the Intercontinental Exchange hit its highest in 14-month on Friday as harvest delays in Thailand and India helped to tighten supplies.

The most tracked, Sugar #11 or the March raw sugar, ​​settled up 2.6%, or 36 cents, to $14.07​​ cents per lb., its highest since Oct. 25, 2018.The contract strengthened 5.7% in the week. March white sugar ​​settled up 2.6%, or $9.40, to $376.80 per tonne.

Sugar prices raced up to 14-month high on Friday after Citigroup raised its global 2019/20 sugar deficit estimate to 7.6 MMT from a previous estimate of 7.0 MMT as sugar crop risks persist in India and Thailand.

"Thailand cane area and yields remain at risk, with production down about 2.5 million tonnes year on year this season," Citi, said in a note.

Sugar prices added to their gains on Friday after the USDA in its WASDE report cut U.S. 2019/20 sugar production estimate by -1.5% to 8.158 MMT from a Dec estimate of 8.280 MMT. The U.S. Department of Agriculture set closely-watched sugar stocks-to-use ratio for 2019-20 at 12.7%, down from 13.5% in the previous month's report.

Through the week Sugar #11 had cemented its base past 13.50 cents. ICE Raw Sugar marked beginning of the past week, i.e., 6th January, at 14-months high, following gains in Crude Oil prices that touched 4-months high, on Mideast tensions. However, the following 2 days raw sugar retreated from 14-months high due to slip in crude prices. Thereafter, raw sugar managed to bounce back by Thursday’s closing session, where it settled at 13.71 cents/lb on hopes of tighter global supplies and optimism for China to boost its ethanol imports.

According to USDA data, China will need 18 MMT of ethanol a year, four times its current 4.2 MMT output, to mandate the use of E-10 (a 10% ethanol-gasoline mix) to satisfy its 3.6 million bpd gasoline requirement. Increased ethanol demand will encourage refiners to use more sugar cane for ethanol production, thus reducing sugar production and providing support for sugar prices.

Sugar prices went in a rally-mode after Paragon Global Markets on Thursday forecast that the 2019/20 global sugar deficit will reach 10 MMT, well above ISO's estimate of 6.1 MMT, due to lower sugar production in Mexico, U.S., and Thailand.

The latest CFTC data showed that managed money traders reduced their net long position. They reduced their net long position by 9202 contracts to 13070 contracts. Trade reduced their net short position during the week by 14230 contracts to 179581 contracts.Open interest was up by 15030 contracts to 179581 contracts.

This was the 11th consecutive week when markets have closed up. Technically market is overbought and managed money reducing their long position indicates that market may witness correction in the near term

Support for the Sugar No. 11 March lies at 13.45 cents /lb and resistance at 14.43 cents/lb.

(By Commodities control Bureau +91-22-40015502)

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