Mumbai (Commodities Control) - Sugar prices ended tad bit higher by less than 1% for the week ended 15th May. ICE raw sugar was seen cruising through the 10-10.70 cents range between and 11th and 15th May. Crude oil movement, (mostly) weak Brazilian currency and supply-demand concerns were the factors that kept NY sugar playing within a range.
On technical charts however, short covering continues to cushion sugar prices. Chart indicates short covering for 3rd week in a row. According to the latest CFTC data for the week ended 12th May, managed money in NY sugar cut its net shorts to 51,423 contracts vs 55,404 contracts last week, down 3981 contracts.
Meanwhile, open interest moved up by 33,259 contracts at 11,61,585 contracts.
On Friday, July raw sugar settled down 0.08 cents, or 0.8%, at 10.38 cents per lb, having earlier gained almost 3%.
Oil prices touched a 1-1/2-month high amid signs demand for crude was picking up, rounding out a week of bullish news on the supply front.
However weakness in the Brazilian Real caught up with sugar dragging it lower. The Real on Friday fell 0.37% but remained above Thursday's record low of 5.970 reals/USD.
Similar to its week-end closing, Monday started on a weak note for raw sugar on higher output estimates for Brazil along with dull Real. July raw sugar settled down 0.17 cent at 10.12 cents per lb.
Sugar exporter Alta Mogiana said on Monday that Brazil's 2020/21 Center South sugar production may jump 37% y/y to 36.67 MMT as the recent plunge in ethanol prices spurs Brazil's sugar millers to divert 47% of cane juice to produce sugar, up from 34% in 2019/20.
However between Tuesday and Thursday, raw sugar prices managed to gain some points on the back of stronger crude oil that triggered short covering and Brazil supply concerns.
The CEO of Brazil's Santos port, Brazil's biggest port, said that port workers are starting to fall ill from the spread of the coronavirus, which may lead to restricted operations at the port.
In a bearish factor, however, Unica on Tuesday reported that Brazil's Center-South sugar production in the second half of April surged 93% y/y to 2.016 MT, with the percentage of cane used for sugar climbing to 45.76% in 2020/21 from 30.87% in 2019/20. Unica on Tuesday also reported that Brazil's sugarcane-based ethanol sales in April tumbled 32% y/y to 1.78 bln liters.
Another negative factor for sugar prices was last Tuesday's forecast from Conab, Brazil's official government forecasting agency, that Brazil's 2020/21 sugar production will climb 18.5% y/y to 35.3 MMT as millers divert more cane juice to produce sugar as the outlook for ethanol has been decimated by the drop in consumption and prices. Conab projects Brazil's mills will divert 42.4% of cane juice to produce sugar in 2020/21, up from 34.9% in 2019/20.
Sugar production in the United States is seen reaching 9.005 million short tonnes in the 2020-21 season, 12.2% more than seen in the previous cycle.
Sugar prices continue to be undercut by concern about weaker sugar demand due to the coronavirus pandemic. Researcher Czarnikow on Thursday projected that global sugar consumption will fall 1% this season, the first decline in 40 years, because of lockdowns to stem the spread of the coronavirus. Marex Spectron on Tuesday said it expects 2020/21 global sugar consumption to fall by 2-5 MMT (1%-3%) due to the negative effects of Covid-19.
Meanwhile as per Government’s 3rd advance estimates of production of major crops on 2019-20, total production of sugarcane in India during 2019-20 is estimated at 358.14 million tonnes, down 47 MT from last year.
Sugar prices have support from reduced sugar production in India after the Indian Sugar Mills Association (ISMA) reported last Friday that India Oct-Apr sugar output fell 20% y/y to 25.8 MMT.
Fitch ratings said while sugar has been helped of late by a temporary rebound in the Brazilian real, it expects prices to remain under pressure in the near term due to coronavirus-induced demand destruction and generally weak oil prices.
Support and Resistance for sugar #11 lies at 10.06 cents and 10.84 cents per lb, respectively.
(Commodities Control Bureau)
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