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Weekly: ICE Raw Sugar Marks Sweetest Weekly Rally Buoyed by Global Supply Concerns & Firm Energy Prices; Fund Buying Rebounds

22 Feb 2021 7:22 am
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Mumbai (Commodities Control) – NY sugar marked a sharp weekly gain for March futures, as it rose to the highest level in nearly four years on Friday to post a 7.5% gain in the latest week. Most-active May futures sweetened by 110 points for the week ended 19th February, buoyed by tightening short-term supplies. ICE raw sugar for May futures briefly touched 17.03 cents per lb, before settling for the week, albeit sub-17 cents level.

Last week, NY sugar ended 0.38% lower.

On Friday, March raw sugar rose by 0.28 cent, or 1.8%, to 17.79 cents per lb after peaking at 17.96 cents, the highest for the front month since March 2017. Meanwhile the most-active May contract ended at 16.89 cents per lb, 1.81% higher on Friday. May white sugar rose by $8.20 to $481.40 per tonne. It hit a contract high of $484.80 during the session.

Sugar production is falling in Thailand after the Thailand Office of the Cane & Sugar Board reported Tuesday that Thailand's 2020/21 sugar production during Dec 10-Feb 12 fell 23% y/y to 5.5 MMT.

Dealers said that Brazil's harvest may start a bit later than normal had added to concerns about tight supplies.

The run-up in crude oil futures this month has also been supportive for sugar although energy prices have fallen back a bit towards the end of this week.

Signs of smaller sugar exports from India are another positive factor for sugar prices. The Indian Sugar Mills Association (ISMA) said on Thursday that India's sugar mills have only contracted 2.5 MMT of sugar exports this year, below the government's export target of 6 MMT on a shortage of shipping containers.

Also, the All India Sugar Trade Association has projected India's 2020/21 sugar exports may only total 4.3 MMT, down 25% from 2019/20.Commodities group Czarnikow expects global sugar consumption to return to 2019 levels this year as the global economy recovers from the coronavirus pandemic.

Early this week, Commerzbank said the sugar market is expected to record a slightly higher surplus this season versus the last; however, price risk is skewed to the upside with lower output likely to drive prices up more than higher output will drive them down.

It is to be noted that after five straight weeks of fall in net longs of managed money, CFTC report for the week ended 16th February pointed towards a rise of 2,872 contracts to 197,124 contracts. While the shorts did rise, long positions moved higher by 3,450 contracts after five consecutive weekly drops. The short side gained 577 contracts. The open interest was registered at 12,73,244 contracts vs 13,55,888 contracts last week.

On the bearish side however, higher sugar production from India is negative for sugar prices. On Thursday, ISMA reported that India Oct-Feb 15 sugar production was already up 23% y/y to 20.9 MMT. The India Sugar Trade Association last Thursday forecast that 2020/21 India sugar production will increase 9% y/y to 29.9 MMT.

Support and resistance for Sugar#11 May contract lies at 16.31 and 17.45 cents per lb, respectively.

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