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Weekly: ICE Sugar Slides on Weak Whites, Dull Demand & Higher Output Concerns

29 Jun 2020 10:11 am
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MUMBAI (commodities control) – Sugar prices on the Intercontinental Exchange ended down 4.6% for the week ended 26th June, led by the fall in London white sugar and on the prospects for increased sugar production in India.

This was mainly due to ease in demand for refined sugar. Also modest delivery is expected during expiry of July contract.

Sugar prices saw continued weakness on the prospects of increased sugar production in India. The Indian Sugar Mills Association (ISMA) said Thursday that India's 2020/21 sugar production would climb 17.7% y/y to 32.01 MMT as sugar acreage is increased by 8.1% to 5.23 mln hectares.

ISMA also projects that India's 2020/21 sugar exports will jump to 7 MMT, up 25.7% from 5.2 MMT in 2019/20.

The most tracked, Sugar no 11 or the October 2020 contract ended down 4.6% or 56 points at 11.62 cents/lb, while the London December white sugar ended down 4.64% at $351.20 a tonne.

The premium for August whites versus October has narrowed to around $2.7 per tonne versus $28 in late May, indicating easing supply tightness.

The whites refining premium has, meanwhile, fallen below $95 a tonne from more than $130 in late May again indicating slowing down of demand for white sugar.

The fundamentals on both the supply and demand sides are getting weaker. The closure of bars and restaurants and the cancellation of events will lead to a drop in sugar consumption this season - a first in 40 years," noted Agritel.

"With the Brazilian and Australian crush underway, plus COVID-19-reduced 2019/20 consumption, Rabobank holds a bearish short-term price view - forecasting 10.50 cents per lb in the third quarter," said the bank in a note.

"This will inflate a surplus already envisaged for 2020-21 due to strong production increases in Brazil and India," it added.

Also Marex Spectron projected that Thailand's 2020/21 sugar production will climb by 2.4% y/y to 8.5 MMT. Thailand is the world's second-biggest sugar exporter.

Slump in crude oil prices along with sharp drop in the Brazilian Real fueled fund selling in sugar futures. During mid-week, crude oil prices and the Brazilian Real tumbled heavily weighing on sugar prices.

Meanwhile on the Indian side, the weak global cues and rising sales by Indian sugar mills have dragged domestic sugar prices lower this week.

Sugar mills are desperately trying to sell off the remaining quota sugar by the last week of June.

French sugar maker Cristal Union, Europe's fourth-largest sugar group, on Tuesday reported a net loss of 89 million euros ($100 million) for its 2019/20 financial year reflecting low sugar prices and exceptional costs.

According to CFTC report dated 23rd June 2020, managed money added 16,094 contracts to the long side, while simultaneously reducing 7631 contracts on the short side. Taking the net longs to 8463 contracts.

Support for sugar #11 (October futures) is at 11.50 cents and resistance is at 12.50 cents/lb.

(Commodities Control Bureau)

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