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Weekly: ICE Raw Sugar Ends Flat amid Mixed Fundamentals, Waning Fund Buying; Experts Eye Week's High for Trend Signals

7 Mar 2021 4:38 pm
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Mumbai Commodities Control - For the week-ended 5th march, NY Sugar May’21 contract settled at 16.40 cents with a loss of 5 points or 0.3%. The most-active contract witnessed the sweetener reaching the highs of 16.70 cents per lb during the week and momentarily slipped under 16 cents in the second half of the week. This was the second straight week that ICE raw sugar registered a weekly loss, albeit comparatively much smaller than the prior week.

Last week, Sugar#11 ended the week at sub-17 Cents level, after reaching near a four-year peak at 17.52 cents per lb early in the week. For the week-ended 26th February, the most-active May '21 futures shed 2.62% or 44 points.

Sharp rally in crude oil may have cushioned sugar prices this week, but stronger dollar and Higher Indian sugar output along with sharp scale off in fund buying weighed on the sweetener.

On Friday, Sugar prices settled moderately higher on strength in crude oil prices. Crude prices on Friday rallied by more than 3% to a 1-3/4 year high.May raw sugar rose by 0.14 cent to 16.40 cents per lb, boosted partly by a rise in crude oil prices to the highest level in almost 14 months. May white sugar rose by $1.50 to $463.50 a tonne.

Sugar prices on Thursday fell to a 2-week low on a surge in sugar production in India. Data on Wednesday from India's Sugar Mills Association showed that India's Oct-Feb sugar production rose 20% y/y to 23.38 MMT.

Weakness in the Brazilian real on Wednesday was another negative factor for sugar prices as the real fell to a 4-month low against the dollar on Wednesday.

Last week, concern about smaller global sugar supplies fueled recent fund buying of sugar futures. Brazil reported a week prior that current shipping delays for its soybean exports might curb global sugar supplies because the queue of vessels waiting at Brazilian ports is so large that bottlenecks will likely continue until May when sugar is normally the biggest crop for export.

Last week, the European Commission said that EU 2021/22 sugar production will fall 12% y/y to 15.4 MMT.

Sugar also had support from falling production in Thailand, the world's second-largest sugar exporter. The Thailand Office of the Cane & Sugar Board reported that Thailand's 2020/21 sugar production from Dec 10-Feb 26 fell 15% y/y to 6.8 MMT.

Adding to the bearish factors was a note by Trader Sucden this Friday. They expect a small global sugar deficit in 2020/21, as higher production in the Northern hemisphere will be offset by a lower output in Brazil.

Sucden estimates total sucrose production in Brazil's center-south to fall about 10% in the new season due to a smaller cane crop seen at 575-580 million tonnes and a lower sugar content in the cane.

Also, Pakistan's state trading agency Trading Corporation of Pakistan (TCP) is believed to have rejected offers and made no purchase in an international tender for 50,000 tonnes of sugar which closed this week, European traders said on Friday.

Sugar fundamentals have been sort of a mixed bag and technical charts were not supportive either.

It is to be noted that last week, concerns about smaller global sugar supplies fueled fund buying of sugar futures. For the week ended 2nd March however, net longs have dropped to 207,738 contracts, after managed money reported two consecutive weekly rises. Net longs fell by 10,812 contracts since last week, due to simultaneous drop in the long position and addition to the short side. The open interest was registered at 11,87,494 contracts vs 12,50,897 contracts last week.

In the coming days/weeks, technical experts expect the downtrend to continue, while the market is trading below resistance level 16.70 cents, which will be followed by reaching support level 15.65 cents and 15 cents per lb.

Meanwhile, immediate support and resistance for Sugar #11 lies at 16.30 and 16.61 cents per lb, respectively.

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