Mumbai (Commodities Control) – Active-contract of raw sugar futures on ICE plunged over 6% for the week ended 28th February. While on Friday, the contract fell to a 7-week low as concerns about the spread of the coronavirus sparked widespread losses in crude oil and other commodity markets.
Sugar prices on Friday extended their week-long slide as NY sugar fell to a 1-1/2 month low, and London sugar slid to a 1-month low. Weakness in crude prices and a slump in the Brazilian real to a new record low Friday weighed on sugar prices. The Brazilian Real on Friday fell 0.39% against the dollar and posted a new record low of 4.5138 Reals/USD.
However, sugar did recover most of its losses after the International Sugar Organization (ISO) raised its global 2019/20 sugar deficit estimate to an 11-year high of 9.4 MMT from a November estimate of 6.1 MMT.
May raw sugar settled down 6 cents, or 0.4%, at 14.14 cents per lb, after sliding to a seven-week low of 13.88 cents. The contract was 6.4% lower on the week. May white sugar settled down $2.10, or 0.5%, at $396.60 a tonne per tonne.
Despite the concerns of global supply tightness, however, the sky-rocketing prices of sugar met with its downtrend in the past week alongside other commodities.
Sugar futures on ICE fell on Monday as the rapid spread of the coronavirus triggered broad-based weakness in commodity and equity markets. Sugar prices moved sharply lower as a plunge in crude oil prices undercut ethanol prices and was negative for sugar. Crude oil fell more than 4% on Monday and posted a 1-1/2 week low. Lower crude prices are negative for ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol production, thus boosting sugar supplies. May raw sugar settled 39 cents or 2.58% lower at 14.73 cents/lb. May white sugar closed $8.6, or 2.03%.
Having said so, the market remained underpinned by tightening supplies linked to poor crops in Thailand and India.
Fitch Solutions cut its forecast for Thai sugar production in 2019/20 to 9.8 million tonnes from 13.5 million.
On Monday, ISMA upped its sugar output forecast by half a million tonnes to 26.5 million tonnes for this year, exacerbating surplus supplies in the world's biggest producer of the sweetener. The current 2019/20 season will leave around 6 million tonnes of surplus for the next year beginning October 2019, the Indian Sugar Mills Association (ISMA) said in a statement.
Raw sugar prices on ICE continued to decline on Tuesday on concern of continuing fears over the rapid spread of the new coronavirus, even as dwindling supplies remained a focus for traders. May raw sugar settles flat at 14.74 cents. Sugar prices dwindled due to weakness in crude prices after crude oil fell 2.6% to a 2-week low.
However, Tuesday’s support came from Thailand's Office of the Cane and Sugar Board on a report that Thailand's sugar production from Dec 1-Feb 23 was down by 8.1% y/y at 7.9 MMT.
Meanwhile, U.S. Centers for Disease Control and Prevention asked Americans to prepare for the new coronavirus to spread after reports of new cases in several more countries.
ICE sugar prices extended southward move on Wednesday as U.S. crude oil dropped below $50 a barrel after Asia, Europe and the Middle East reported hundreds of new coronavirus cases and the United States warned the disease could spread. May contract ended 20 points lower to close at 14.54 cents/lb. Oil prices hit their lowest since January 2019 as authorities around the world battled to prevent the spread of coronavirus, which had reached about 30 countries.
Raw sugar prices on ICE hit their lowest level in nearly a month on Thursday as a rise in new coronavirus cases outside China fueled fears of a pandemic that could slow the global economy. Prices slipped on weakness in crude prices and a plunge in the Brazilian Real to a new record low. May raw sugar ended 34 cents lower at 14.20 cents/lb.
However, Sugar dealers remain concerned about a widening deficit this season and possibly next, with production falling in key producers such as Thailand and India.
Meanwhile, Indonesia’s Agricultural Ministry has recommended imports of 130,000 tonnes of white sugar by May, as the sugarcane harvest season in the country is expected to start late.
An Ethiopian state buyer has issued an international tender to buy up to 200,000 tonnes of white sugar, traders said.
Dealers witnessed the expiry of the March contract on Friday providing a major short-term focus.
"With the macro picture against it, sugar swam against the tide, to begin with, and is now in correction mode. Nevertheless, the drop has been nowhere near as deep as in other markets, and we believe it is offering a buying opportunity," Sucden Financial said in a note over the weekend.
The latest CFTC data for the week ended 25th February showed that the net long for managed money traders’, in Sugar #11, stood at 189,176 contracts, up 22,779 contracts from the previous week. Open interest, however, tumbled for the second week by 34,395 contracts to 13, 83,663 contracts.
Support and Resistance for Sugar #11 lies at 13.73 cents and 14.41 cents/lb, respectively.
(Commodities Control Bureau)
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