Mumbai (Commodities Control) –ICE raw sugar managed to turn the tables and rise nearly 12% for the week ended 1st May, majorly, on the back of Friday’s up move brought about by giant delivery against the May contract.
Stronger crude oil and increased fuel demand in Brazil provided additional support to sugar #11 in the past week.
Last week, sugar futures lost close to 7% dragged down by historic rout in crude oil prices and record low Brazilian currency.
NY sugar hit a one-month high on Friday, extending the previous session's sharp gains as Brent prices steadied above $26 a barrel and after a giant delivery against the May contract.
Sugar prices on Friday rallied sharply for a third session. Sugar prices found support from a 4% jump in crude oil prices to a 1-1/2 week high, which benefits ethanol prices and is supportive for sugar prices.
July raw sugar settled up 0.60 cents, or 5.8%, at 10.97 cents per lb, the highest since late March. August white sugar settled up $15.10, or 4.5%, at $351.30 a tonne.
The charts did see some short covering this week. Although, managed money in NY sugar continued to raise its net shorts for the 6th consecutive week. According to the latest CFTC data for the week ended 28th April, managed money in NY sugar has raised its net shorts to 70,800 contracts as compared with 66,025 contracts in the past week (up 7% W/W).
It is interesting to that while the managed money has been building its short positions over several weeks, the long position was added for the first time in 9 weeks now; up 8258 contracts from past week to 88,087 contracts. While managed money added 13,033 contracts to its short positions taking its gross short postion to 158,887 contracts.
Meanwhile, open interest dipped by 5112 contracts at 11, 60,280 contracts.
Barring Monday, when raw sugar futures tanked to 12-year low as oil prices resumed their plunge and the Brazilian currency remained at all-time lows, the prices were decisively headed northward. On Monday, May raw sugar settled down 52 cents, or 5.3%, at 9.21 cents per lb.
Sugar prices continue to feel the heat of Apr 14 report from Unica that Brazil's Center-South Mar ethanol domestic sales dropped 17.7% y/y to 1.37 billion liters, a sign of weak ethanol demand that may prompt Brazil's sugar mills to divert more cane crushing toward sugar production.
However Tuesday onwards, the positioning ahead of May contract expiry, firmness in Brazilian Real and strength in crude oil prices sweetened the deal for sugar futures.
Meanwhile, there are divergent opinions among traders in evaluations if the all-time record delivery near 2.26 million tonnes against the expiration of the May contract was bearish or bullish, some dealers saw positive signs for the market going forward.
"The market is telling us what it thought of the large delivery, combined with the large line-up (in Brazil). Kind of hard to say demand is down. Obviously Brazil is now where the game is and buyers are stepping up," said one sugar broker in the U.S.
Sugar prices also saw support from smaller sugar production from India after the Indian Sugar Mills Association (ISMA) reported on Friday that India Oct-Apr sugar output fell 20% y/y to 25.8 MMT.
However, sugar prices will need to watch for Brazilian Currency and estimates of higher Brazilian sugar output.
JOB Economia e Planejamento said Brazil Center-South sugar production will jump 40% y/y to a record 37.5 MMT as the collapse in fuel prices spurs sugar millers to divert output away from ethanol production and towards sugar.
Even weak ethanol demand is negative for sugar prices after Unica reported Wednesday that Brazil sugarcane-based ethanol sales the first half of April tumbled 32% y/y to 800 mln liters.
However dealers will keep an eye on the charts. A large short position by funds could provide fuel for a short-covering rally in NY sugar futures; part of it witnessed this week
Support and Resistance for sugar #11 lies at 9.98 cents and 11.50 cents per lb, respectively.
(Commodities Control Bureau)
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