Mumbai (Commodities Control) – Most active ICE raw sugar futures loses close to 7% for the week ended 24th April, dragged down by historic rout in crude oil prices, weak demand and record low Brazilian currency.
The contract had settled positive a week prior, with less than 0.5% gain.
On Friday, raw sugar futures closed weighed down by depreciation in the currency of top exporter Brazil.
May raw sugar settled down 0.11 cents, or 1.1%, at 9.73 cents per lb. The front month fell to a low of 9.55 cents on Tuesday, its lowest since June 2008. July NY world sugar #11 on Friday closed down 0.20 cents or 2% at 9.81 cents per lb. August white sugar settled down $4.60, or 1.4%, at $317.40 a tonne.
Speculative sellers march ahead full steam, as they continue to build large short position in sugar #11 for 5th consecutive week. According to the latest CFTC data for the week ended 21st April, managed money in NY sugar has raised its net shorts to 66,025 contracts as compared with 51,179 contracts in the past week (up 30% W/W).
Net shorts in sugar #11 have nearly doubled within a fortnight; close to 33,000 contracts for the week ended 7th April.
Speculative traders added 14,846 contracts of net shorts for the week ended 21st April. Meanwhile, open interest dipped by 144,473 contracts at 11, 65,392 contracts.
The Brazilian real hit a record low against the dollar on Friday. The real on Friday plunged by 3.37% against the dollar and posted a new record low of 5.7456 reals/USD.
A weak real makes dollar denominated prices more attractive and can encourage producer selling. Brazil is leading global producer of sugar.
Ample global sugar supplies are also weighing on prices. Brazil's national crop agency, Conab, on Thursday issued its final estimate and said Brazil 2019/20 sugar production rose 2.6% y/y to 29.8 MMT.
Crumbling crude prices and continuous downtrend in Brazilian Real dragged raw sugar prices to 12 year low within the first two days of the week.
On Tuesday, May raw sugar closed down 0.31 cent, or 3.1%, at 9.75 cents per lb, after setting a contract low of 9.58 cents, the weakest price for the front month since June 2008. While July contract ended 0.25 cent lower at 10.01 cents per lb.
May WTI crude on Monday plunged to the lowest since the contract began trading in 1983. While Spot crude traded at negative value for the first time ever.
On Wednesday and Thursday, sugar futures did manage to settle flat on the back of rebound in crude. However, weakening Brazilian Real continued to pose strong resistance through the week.
Sugar and ethanol company Cosan SA expects increased financial difficulties for some Brazilian companies in the sector as demand for the biofuel falls and prices for the sweetener hover around a 12-year low.
Sugar has lost a third of its value since mid-February, largely on expectations Brazil's cane mills will ramp up output.
Elsewhere, cane output in Thailand, the world's second-largest sugar exporter, was the lowest in a decade in the 2019/20 season, as prolonged drought undermined yields.
Support and resistance for sugar #2 lies at 9.56 cents and 10.14 cents, respectively.
(Commodities Control Bureau)
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