Mumbai (Commodities Control) – Sugar #11 marked its 6th straight weekly gain by the end of 23rd October. March '21 Futures gained over 2% this week, primarily driven by fund buying against a backdrop of uncertainty about the extent to which India might subsidise exports in the current season.
Technically speaking, funds have been constantly raising their bullish bets in raw sugar. On the charts, for the week-ended 20th October, speculators continued to raise their net long position in raw sugar on ICE futures by 12,213 contracts for a total net long of 254,556 contracts. It is interesting to note that net longs shot up for the fifth straight week. Having said so,15,793 contracts were added to the long side to 282,979. Open interest was registered at 11,67,653, up 36,095 contracts.
Having said so, raw sugar futures on ICE closed slightly down on Friday. March raw sugar settled down 0.06 cent, or 0.4%, at 14.72 cents per lb, having touched an eight-month high of 14.94 cents on Thursday.
Sugar prices on Friday moved lower after weakness in the Brazilian real prompted some long liquidation in sugar. The Brazilian real fell 0.47% Friday to a 4-session low against the dollar.
Similarly on Tuesday, Sugar prices fell back on profit-taking after the Indian Sugar Mills Association (ISMA) raised its India 2020/21 sugar production estimate to 31 MMT from a June forecast of 30.5 MMT. Meanwhile, Sugar prices on Wednesday posted moderate losses, weighed down by a slump in crude prices. Crude fell by more than 4% on Wednesday.
Although if we look at the week as a whole, NY Sugar maintained a positive bias. The sweetener trended higher over the past five weeks on concern that Brazil's dry conditions may curb sugarcane yields and reduce Brazil's sugar production. Irregular rain in Brazil's sugar-growing areas is keeping soil moisture levels below normal.
On Monday, data from Somar Meteorologia showed that rain in southern Brazil was only 9.8 mm in the past week or 33% of the historical average.
Also sources reveal that Indian sugar export subsidies are unlikely to be renewed before state elections are completed next month. Dealers said the India policy delay will keep the market nervous and unpredictable but with an upside bias that is likely to take it above 15 cents, at least briefly.
Meanwhile, China imported 540,000 tonnes of sugar in September, data showed, 29.1% more than a year ago.
Another bullish factor for sugar was Thursday's prediction from researcher Datagro that Brazil Center-South 2021/22 sugar production will fall 5.3% y/y to 36 MMT due to excessive dryness.
Maxar recently said that Brazil's sugar-growing regions have only received 5%-25% of average rain in the past few months, leaving crops "extremely dry." Prolonged excessive dryness in Brazil that cuts sugarcane yields.
Sugar prices are seeing support from the smaller sugar crop in Thailand, which has been decimated by drought. The Thailand Sugar Mills Corp said Oct 2 that Thailand's 2020/21 sugar production would fall 13% y/y to an 11-year low of 7.2 MMT as dry weather this year ravaged cane plantations.
Support and Resistance for Sugar #11 lies at 14.44 cents and 15.02 cents per lb, respectively.
(Commodities Control Bureau)
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