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Weekly: NY Sugar Slips in Red amid Higher Global Supply Concerns; Experts Eye 14.50 C Support Level

30 Nov 2020 8:58 am
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Mumbai Commodities Control - Sugar#11 gave up 3% for the truncated week, ending 27th November. U.S. markets were shut on the 26th November on account of Thanksgiving holiday, while it was an abbreviated trade session on Friday.
During the week, ICE Sugar was generally sombre and easily pared most of the gains due to higher global supply concerns. On Tuesday ICE raw sugar went as high as 15.50 cents per lb, but ended with moderate gains, on news of Indian sugar mills planning to export the sweetener without the support of government subsidies, for the first time in three years, while scrambling to pay dues owing to farmers.

Sugar price on Friday posted modest gains as they rebounded from Wednesday's 2-week lows. A fall in the dollar index to a 2-3/4 month low on Friday sparked short-covering in sugar futures.

ICE raw sugar futures for March’21 contract ended 0.05 cents or 0.34% higher at 14.82 cents per lb on Friday and London white sugar ended 0.60 cents or 0.15% stronger.

On Wednesday, sugar prices dropped to 2-week lows after Unica reported that Brazil's Center-South sugar production in the first half of November rose 57% y/y to 1.242 MMT, above expectations of 1.120 MMT. The percentage of cane used for sugar rose to 41.74% in 2020/21 from 28.42% in 2019/20.

Also, Meir Commodities India Pvt on Tuesday projected that India would export 1.5-2.0 MMT of sugar in 2020/21 without any government subsidy since neighboring countries can be expected to purchase Indian sugar rather than Brazilian sugar because of cheaper freight costs.

A negative for sugar prices was last Thursday's forecast from the USDA's Foreign Agricultural Service (FAS) that India's 2020/21 sugar production will climb 16.8 % y/y to 33.76 MMT and that India's sugar exports will climb 3.5% to 6.0 MMT.

On the bullish side, however, Indonesia's 2021 white sugar output is estimated at 2.2 million tonnes, slightly lower than the 2020 forecast of 2.23 million tonnes, the deputy economic minister said.

Also prior week, ISO cut its global 2020/21 sugar production estimate and increased its global 2020/21 sugar deficit estimate. ISO projects that the global 2020/21 sugar market would fall into deficit by 3.5 MT from a 1.86 MMT surplus in 2019/20.

CFTC data until 24th November has been delayed this week due to federal holiday and will be available on 30th November now. Last week, for the week ended 17th November, net longs in managed money bounced back after two consecutive weeks of fall. According to the CFTC data, the net longs were registered at 252,922 contacts, up 7,234 contracts from last week. This was the result of simultaneous addition to the long side and reduction in shorts. The open interest was reported at 12,62,183 contracts, up 27,582. Also, fund buying in London sugar supported the recent rally in prices.

Experts are wary of a downward pressure, in case the market drops below support level 14.50 cents per lb, which will be followed by moving down to support level 13.00 cents.
Support and resistance for Sugar #11 lies at 14.50 cents and 15.34 cents per lb, respectively.

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